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Near their highs

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After edging back from session highs, the major indexes have found some renewed late session bullishness as the major indexes now move back near their intra-day upper levels of resistance.

Some bullish comments out of Bear Sterns' economist John Ryding that his firm is "growing increasingly positive on the outlook for the economy" because of strength in the manufacturing sector and fiscal-stimulus moves under way in the U.S, finds the major indexes staging a late afternoon rally back near their late- morning highs.

While today's economic data had wholesale inventories up 0.2%, the sales component showed an increase of 1.2%, which pushed the inventory-to-sales ratio to a new record low of 1.21. The inventory-to-sales ratio has been edging lower on each report, and continues to be viewed as somewhat "bullish" on the thought that at some point, demand pull will eventually see a greater depletion of inventory and create a more noticeable rebound in manufacturing sectors as inventory gets pulled off the shelves at a faster pace.

Bears will argue that the equity markets continue to "anticipate" something that just isn't happening and lack of inventory depletions, until reversed, will continue to be a cloud on any signs of meaningful economic recovery.

One thing I'm noting in the technology sector today, that is a bit unnerving to technology bulls may be the Semiconductor Index (SOX.X) 328.76 +1.96%, lagging the NASDAQ-100 Index (NDX.X) 1,073.75 +2.99% gain, which usually finds the semis near the front of a percentage gain move. One stock I'll note weakness in is DRAM giant Micron Technology (NYSE:MU) $9.94 -1.09%, which traded in marginally positive territory earlier in the session at $10.36, but has really started to fade lower in the latter part of today's session. Micron (MU) has been a "leadership" stock to the downside in the sector and today's continued weakness despite some broader technology bullishness is viewed as a potential negative, not only for the stock, but perhaps the sector as well. While Micron's DRAM products are viewed as more of a commodity where price is very sensitive to supply/demand issues, today's marginal weakness in the stock is notable.

Market volume today is healthy and gives bulls a feel that yesterday's declines may have just been profit-taking related.

NYSE volume is at 1.3 billion shares, while NASDAQ has been able to press the 1.5 billion share level. Both volumes are close to Tuesday's advancing volumes of 1.4 billion and 1.5 billion respectively.

The advance decline line at the NYSE and NASDAQ is identical, with advancers outnumber decliners by a 23 to 10 margin, which is slightly better than 2:1.

We've seen a marked increase in bullishness in the new highs versus new lows indicator today. NYSE shows 129 stocks trading new highs versus just 10 stocks hitting new lows, while NASDAQ is showing 98 stocks at new 52-week highs versus 26 stocks at new lows. While I haven't been keeping pen and paper entries on this breadth, I can't remember the last time I've new highs above the 100 level in either the NYSE or NASDAQ. To me, this indicator tells me that traders are getting either more aggressive with their buying of "strong stocks," or getting more conviction toward a growing economic backdrop.

Jeff Bailey

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