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ISM data weighs on tech sectors

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Technology stocks as depicted by the NASDAQ-100 Index (NDX.X) 997.54 -1.2% and NASDAQ-100 Tracking Stock (AMEX:QQQ) $24.81 -1.39% lead the major indexes back into negative territory after today's 10:00 AM release of the Institute for Supply Management's Index fell to 50.5 in February, which was below economists forecast for 52.0, and below January's reading of 53.9. While February's 50.5 reading was above the 50.0 level, which signals some growth at the nation's factor level, the news soured investor's taste for stocks that had reached a session high just prior to their release.

The tech-heavier NASDAQ-100 was the first major index to break into negative territory, and we've seen some furthering of losses there. The Dow Industrials (INDU) 7,878 -0.16% has just inched into negative territory and has already shows some "key" testing of near-term support coming into play after this morning's release of the ISM data. The broader S&P 500 Index (SPX.X) 839 -0.29% has also just edged into negative territory, after trading a morning high of 852.34.

In this morning's market monitor at OptionInvestor.com, we've been taking a look at some of the "new" levels from WEEKLY and MONTHLY pivot analysis.

Here's a quick look at the Dow Industrials (INDU) (screen capture was earlier this morning) bar chart with MONTHLY (red retracement) and WEEKLY (blue retracement) levels. I've colored both the MONTHLY and WEEKLY pivots "pink" which identifies a correlative "zone of support," which looks to have come into play on today's pullback after the weaker-than-expected ISM data.

Dow Industrials (INDU) -Daily Interval

I think it also useful to use some of the levels identified in the WEEKLY and MONTHLY pivot analysis and retracement levels, and take those levels over to the supply/demand chart of the Dow Industrials. Near-term, I see a rather important level of support in play between the WEEKLY pivot of 7,876 and MONTHLY pivot of 7,890 in play, with a zone of resistance found between the WEEKLY R1 of 8,032 and the MONTHLY 38.2% retracement level of 8,014.

Dow Industrials (INDU) - 50-point box

Similar to the potential triangle formation that was developing in the SPX, as discussed in this weekend's "Ask the Analyst" column, we see a similar triangle formation developing in the Dow Industrials' point/figure chart. Here, I've taken the WEEKLY S2 and R2 levels, along with correlative pivot levels from the WEEKLY and MONTHLY pivot matrix analysis, and overlaid them on the Dow. These really give a short-term "neutral" look to the Dow, but a longer-term and intermediate-term bearish look if based on trends.

Of the bullish % indicators we follow, the very narrow Dow Industrials Bullish % ($BPINDU) is the most "oversold" at 13.33%, after having been "overbought" at 72% back in late November, just before the Dow hit its December (red C) highs near 9,000.

I would think Dow bears are looking for "one last leg lower" in the Dow from current levels, while Dow bulls could begin accumulating partial positions from the bullish side at current levels, with options traders BUYING TIME, with MINIMUM 3-month expirations.

Jeff Bailey

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