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Industrials battle back, while tech suffers

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The Dow Industrials (INDU) 8,515 -0.25% have battled back to par an earlier 115-point decline, which may be partly due to recent weakness in the U.S. dollar which may be perceived as giving some of the components that derive a great deal of sales in foreign markets some favorable pricing abilities against their foreign- based competitors.

That's about the only "explanation" I can come up with from a fundamental view as the US Dollar Index (dx00y) continues to depict a weaker dollar against major foreign currencies.

At the other end of the spectrum, technology sectors depict the bulk of today's declines with the larger capped NASDAQ stocks, represented by the NASDAQ-100 Index (NDX.X) 1,020 -1.87% are weighed lower by the GSTI Software Index (GSO.X) 104.09 -2.51% and CBOE Internet Index (INX.X) 97.04 -2.47%. It is notable that the technology sectors have also edged up from their lows, but not nearly as impressive of a recovery as the Dow Industrials.

The Natural Gas Index (XNG.X) 146.85 +2.75% continues to hold top gainer in today's sector action, with the Gold/Silver Index (XAU.X) 76.18 +1.08% digesting yesterday's gains at its 61.8% retracement level (retracement from 88.65 to 55.73). In today's market monitor at OptionInvestor.com, we discussed these technicals at 12:08:36, as a level where we might expect to see some profit taking from the lows and would look for further bullishness to build on a move above the September 16th relative high of 77.34. After setting a contract high at $336.70, February Gold (gc03g) $331.90 -0.06 has edged into negative territory and we'd now monitor for near-term support at $330.

Today's trade at 890 in the S&P 500 Index (SPX.X) 896 -0.56% has done technical damage to our point and figure chart with traditional $5 box setting, as the trade at 890 now violates upward trend. From here, more critical support is found above the 870 level, but a trade at 870 would have the SPX generating a spread-triple-bottom sell signal. With today's break of trend, we'd now look for formidable resistance to form at the 915 level, just above the recent double-bottom sell signal at 910.

While we noted DIVERGENCE between Gold and the U.S. Dollar yesterday, further negative DIVERGENCE may be developing between U.S. Treasuries and today's stock price action. The reason I say "negative" is that Treasuries are seeing selling, and that selling while finding a lift from the lows in equities can be viewed as a negative with the weaker dollar. Potentially in play is the thought that the weaker dollar is sign of capital outflows from the U.S. and that action combined with selling in Treasuries could well be a "lack of confidence" or avoidance of risk in the U.S. should geopolitical tensions begin to rise not only with the U.S. and Iraq, but also with North Korea. Earlier this morning, President Bush spoke with a sharp tongue to North Korean officials regarding their intent to restart a nuclear facility.

Market volume is once again on the light side with NYSE volume just over the 735 million mark, while NASDAQ volume is light at 861 million shares traded.

Breadth on a broader scale is negative with the NYSE showing decliners outnumbering advancers by a 3 to 2 margin, while NASDAQ breadth is negative with decliners outnumbering advancers at 7 to 3.

New 52-week highs versus new 52-week lows are ever so slightly positive at both the NYSE and NASDAQ. NYSE has 25 stocks having traded a 52-week high in today's session compared to 24 stocks at new lows, while NASDAQ is equally paired with 35 stocks trading a 52-week high versus 34 stocks trading new lows.

Jeff Bailey

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