Option Investor
Market Updates

Making way above their 200-day

HAVING TROUBLE PRINTING?
Printer friendly version

It's been a seesaw session today as the major market averages are back in the green with the Dow Industrials (INDU) 8,841 +0.4% now posting a 36-point gain and just 25 points off its morning highs, while the S&P 500 (SPX.X) 932 +0.16 gain 1.5 points, but still 5-points off the morning high.

While the Dow, S&P 500, S&P 100, NYSE Composite and NASDAQ Composite still trade below their 200-day SMA, once narrow leadership from the Wireless Index (YLS.X) 61.37 +4.24% as it was the first sector to break above its 200-day SMA on November 14th at 52.34 now finds other sector indexes making way above their longer-term 200-day SMA's. From a technical perspective, moves above the 200-day moving averages are sign of a potentially longer-term change of fortune for a stock, sector, or market.

The software group as depicted by the GSTI Software Index (GSO.X) 117.78 +1.67% is edging above its 200-day SMA of 117.36 today. On March 11th of this year, after falling below this 200-day SMA, the GSO.X did rally back to finish just a smidge above this longer-term moving average, only to reverse that close the following session and never challenge the 200-day since. Until today that is. Software bulls will most likely make observations of a 2-session consecutive close above this longer-term 200-day for a sign of DIVERGENCE from the past, which may hint of further upside from the group. With sector bellwether Microsoft (NASDAQ:MSFT) $58.44 +0.34% having gapped above its 200-day SMA of $53.54 on November 4th, and making relative highs in recent sessions, this technical action should bode well for the group.

The CBOE Internet Index (INX.X) 105.92 +6.8%, which broke above its 200-day SMA on November 15th at 85.32, hovered either side of the longer-term SMA for two session, but made a break higher last Wednesday at 90.00 and continues a surge higher today spurred not only by continued short-covering, but aggressive bulls turning to the sector looking for some upside action. In Friday's market monitor (10:25:39) I profiled once-high-flyer CMGI Inc. (NASDAQ:CMGI) $0.97 +18.29% as a stock for aggressive bulls to look for upside action as the stock traded right at it's 200-day SMA (trade like an option, don't OVER LEVERAGE). There was no news on the stock, but I'm thinking Friday's close above this longer-term 200-day SMA had bears looking to cover further. While the stock had doubled from its lows, the stock still trades well off its 52-week highs of $3.15 and all-time highs of $163.50. I'm thinking there's still some shorts in the stock with profits at risk, and as mentioned recently, some of these breaks and continuations above the closely monitored 200-day SMA does appear to be getting some upside action.

As the Wireless Index (YLS.X) was the first "telecom" and even "technology" sector to make the move above its 200-day SMA, the Fiber Optic Index (FOP.X) 57.69 +7.69% breaks above its 200-day SMA of 56.13 today. Most likely, this action has sector bears reviewing some longer-term profitable positions and assessing near-term upside risk in sector-related stocks to their 200-day SMA's.

On a telecom theme, the North American Telecom Index (XTC.X) 501 +5.05% edged above psychological resistance of 500, but makes a continuation move higher after breaking above its 200-day SMA of 470 last Thursday.

While most of the sectors mentioned above are "technology" that are breaking above the 200-day SMA, the Securities Broker/Dealer Index (XBD.X) 458 +0.10% broke above its 200-day SMA on Wednesday of last week at 432, and added some gains on Thursday. The recent two sessions have found consolidation, and even a broader market bull or a technology bull wouldn't mind seeing continued bullishness prevail to hint that similar technical bullishness builds on a longer-term basis.

Jeff Bailey

Intraday Update Archives