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U.N. weapons inspectors say "no smoking gun"

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Stocks have reversed all of yesterday's losses after economic data provided no "surprise" disappointments and news out of the U.N. weapons inspection team says their findings provided no evidence of a "smoking gun" that Iraq has been developing any type of nuclear weapons.

While the U.N. weapons inspection will be questioned by many that Iraq has had ample opportunity to "hide" any evidence that nuclear weaponry exists, the markets have responded bullish to the news as "war fears" may have been temporarily calmed, if not delayed.

In the early going, the major indexes took out our intra-day "resistance 1" levels from daily pivot analysis, and all but the Dow Industrials (INDU) 8,735 +1.63%, which is currently showing a 140-point gain have reached their intra-day "resistance 2" levels.

This morning's rather bullish open in the NASDAQ-100 Index (NDX.X) 1,083 +3.89% may have partially been exacerbated by a clerical error, where a trading clerk errantly mistyped a "0" to an undisclosed, but rather large buy order in the NASDAQ-100, which sent the QQQ jumping to $26.93 in the first 15-minutes of trading. While the error is said to have now been "offset," that got the ball rolling for what has built to be a bullish session in the QQQ.

Sector action is to the upside and in rather meaningful fashion. Only the Gold/Silver Index (XAU.X) 75.90 -2.5%, Utility (UTY.X) 269.67 +0.47% and Defense (DFX.X) 160.85 -0.25% sectors trade in the red.

There has also been trader talk in the bond pits of a large selling in both the 5 and 10-year bonds. Treasuries are seeing strong selling across the maturities, with the 10-year March futures (ty03h) 112'17 -1.15% seeing strong selling and down more than a full point (-1'095) with YIELD ($TNX.X) jumping to 4.143%. The action in the bond market also has traders citing a large asset allocation shift from Treasuries toward equities and lending to today's bullish equity reversal of yesterday's losses.

Upside equity sector action has the Networking Index (NWX.X) 155 +5.26% leading today's sector gains, with Wireless Telecom (YLS.X) 58.87 +5.25%, Fiber Optic (FOP.X) 53.52 +5.29% and more diverse yet communication's related Combined Telecom (IXTCX) 121.78 +5.11% all up better than 5%, after Foundry Networks (NASDAQ:FDRY) $9.67 +18.5% said this morning that it was seeing a pickup in sales of its networking gear.

Despite some rather anemic same store sales reports, the recently beaten down retailing sector has the S&P Retail Index (RLX.X) 270.50 +2.52% trying to edge back above its shorter-term 21-day SMA, which has some analysts viewing today's reverse response to rather weak data being viewed as the bulk of the "bad news" that has been providing weakness, perhaps being factored into today's reported same store sales numbers.

Key technicals in play on a potentially longer-term basis has the NASDAQ-100 Index (NDX.X) 1,081.32 +3.72% making a concerted effort to get back above its longer-term 200-day SMA of 1,065 and rebounding from yesterday's test of a trending higher intermediate-term 50-day SMA of 1,039.86. Of the major indexes, the NASDAQ-100 Index has been one of the few to show signs of bullishness above the 200-day SMA in recent weeks.

We also see the broader NASDAQ Composite (COMPX) 1,442 +2.95% making a break above its 200-day SMA today. On December 2nd, the NASDAQ Composite broke above its 200-day SMA, setting a relative high trade of 1,521 that day, only to be pushed back below the 200-day SMA by the close. A close above the 200-day SMA today could lend to further bullishness and improve investor sentiment among 4-lettered stocks as the NASDAQ Composite has not closed above this long-term moving average since last doing so on March 11, 2002 at 1,929.

Jeff Bailey

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