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Stocks recoup half of morning losses

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After trading a session low after this morning's release of February consumer confidence numbers that fell to 64.0 and well below economist's expectations of 77.0, the major indexes have recouped roughly 1/2 of their morning losses.

Most likely, we are seeing some short-covering as today's low levels of the session came right near the February 13th closing of values of the major indexes, which was the day just before Chief Weapons Inspector Hans Blix reported to the U.N. the following day. Also in play as support found from MONTHLY pivot levels of 818-819 in the S&P 500 (SPX.X) 820.65 -1.43% index.

S&P 500 Index Chart - Daily Interval

Two levels of support look to be holding in the SPX today. The "red" retracement was derived from MONTLY pivot analysis whereby the 100% (782.30) was anchored at the MONTHLY S2 and 0% at the MONTHLY R2 (871.70). The "two levels" in play as support today are the 80.9% retracement and MONTHLY S1 of 819. After the open for stocks, we've seen three program premium alerts triggered in this little 822.80-818 zone (1 buy / 2 sell) and very little change has been seen in the SPX. To me, this hints of a near- term area of stability. However, with Treasuries still seeing some defensive buying today, I'm looking for a break below 817, which was the relative low close on 02/13, the day just before U.N. chief weapons inspector Blix's report to the U.N.

Traders should look for resistance to be building from 835-844, but under uncertain market conditions, would consider a move above 855 in the SPX as bullish.

We've seen a slight improvement in sector action from what had been broadly negative just after this morning's consumer confidence numbers. On a technical basis, the Combined Telecom Index (IXTCX) 111.95 +0.54% has edged into positive territory after a dip to its still trending lower 200-day SMA of 108.56, which also correlated with lower Bolling band (21-day SMA and 2 Std. Deviation) of 108.41. Action is mixed in the group with Dow Component SBC Communications (NYSE:SBC) $20.94 +0.91% looking to rebound from a drubbing taken late last week after the FCC gave more control to states in allowing discounted access to the baby bells land lines. Shares of wireless handset maker Nokia (NYSE:NOK) $13.02 -5.17% sees weakness, most likely on geopolitical concerns regarding North Korea, despite an upgrade to "outperform" from "market perform" from SG Cowen on their belief that handset inventory is being turned off at a faster than expected rate, as well as expectations that the company's new handset lineup should show a strong reception when it is expected to ramp up in the second quarter.

Shares of El Paso Corporation (NYSE:EP) $5.06 +11.2% have given the Utility Index (UTY.X) 237 +0.02% a lift into marginally positive territory. EP is currently the 5th biggest gainer in today's market after the company said it is selling $500 million of its North American continent natural gas assets to Chesapeake Energy (NYSE:CHK) $8.16 -4%. Yesterday, UBS Warburg thought El Paso Corp. (EP) might look to divest of some assets to help keep the company out of Chapter 11 bankruptcy, and that EP could sell upward of $2.9 billion in high-quality assets, with two-thirds of those assets being sold in the firth 5-months of this year.

Volume levels at both the NYSE and NASDAQ are slightly higher that we've seen last week when traders seemed to have taken a break from trading, but are not overly heavy. NYSE and NASDAQ volume are just over the 750 million mark and look on pace for daily volume near 1.3-1.4 billion at this rate.

Market internals are weak with NYSE breadth negative with decliners outnumbering advancers by a 2 to 1 margin. NASDAQ breadth is slightly better, but still negative with decliners outnumbering advancers by a 19 to 10 margin.

Jeff Bailey

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