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Software stocks weigh on NASDAQ-100

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The major market indexes hold positive ground, except for the NASDAQ-100 Index (NDX.X) 1,079 -0.08%, which trades with a fractional 1-point loss as the GSTI Software Index (GSO.X) 106.43 -2.45% leads today's sector weakness after Intuit (NASDAQ:INTU) $39.88 -21.63% warned that lack of customer spending in recent weeks due to the uncertainty of "war with Iraq" would drag on results.

While the NASDAQ-100 Index (NDX.X) continues to consolidate for a fourth-straight session, the heavier weighting from software names keeps this index from providing some "leadership" that had been shown in recent weeks. With recent announcement from some heavily followed technology bellwether's like Applied Materials (NASDAQ:AMAT) $14.06 +1.05% and Oracle (NASDAQ:ORCL) $11.42 -0.69% that they were yet to see any type of sign of "recovery in the economy," the NASDAQ-100 has done well to hold the bulk of last week's gains, but the stalling seems to have the other major indexes looking for some leadership from the NASDAQ-100 to really make a concerted push above current levels.

The Dow Industrials (INDU) 8,355 +0.84% continue to trade and have been showing support at what looks to be a key intra-day level near 8,338, which is also the 38.2% retracement of conventional retracement taken from the October lows to December highs. Dow breadth is positive at this hour with 24 of the 30 components showing gains. Dow gains are being driven by Disney (NYSE:DIS) $17.17 +3.32%, DuPont (NYSE:DD) $40.58 +2.47%, Caterpillar (NYSE:CAT) $51.76 +2.25% and Intel (NASDAQ:INTC) $18.69 +2.13%, while weakness is found in Boeing (NYSE:BA) $27.20 -2.22% and Honeywell (NYSE:HON) $23.23 -1.65%, which both have an aerospace/defense theme to them.

Sector action is broadly positive with sector gainers being Airline (XAL.X) $32.30 +8.35%, Dow Transports (TRAN) 2,214 +2%, Wireless Telecom (YLS.X) 54.34 +1.58% and Cyclical Index (CYC.X) 428 +1.51%.

It has been some time since we've discussed the deeper cyclicals, and current trade in the CYC.X shows this group of stocks edging above its trending lower 50-day SMA. I view this technical action from an economically sensitive sector as near-term bullish and a continued move higher and break above the 440 level most likely sees an extension of the recent rally from 380 to the 200- day SMA of 460.

The broader S&P 500 Index (SPX.X) 880 +0.57% holds a 5-point gain, while the narrower S&P 100 Index (OEX.X) 448.82 +0.67% shows some slight out-performance as it contends with 450 resistance as discussed in this morning's 09:00 Update. In this morning's market monitor, I thought SPX/OEX bulls needed to seem some sponsorship from the S&P Banks Index (BIX.X) 275 +0.04%, which just now trades with a fractional gain after trading in negative territory earlier this morning. Here too, on a near- term basis, a SPX/OEX bull likes the fact that the BIX.X is showing some gains, and this action should help the OEX push through resistance.

A strong round of selling has taken hold in the Treasury bond market, with YIELD curve action flattening. A strong bout of selling is being seen in the shorter-dated 5-year Treasury as YIELD ($FVX.X) jumps to 3.039%. The 10-year bond's YIELD ($TNX.X) is on the rise at 4.066% while the longer-dated 30-year YIELD ($TYX.X) rises to 5.09%. Again... I view this selling in Treasuries and bullish for equities. A key technical level coming into play in the 30-year YIELD ($TYX.X) is found just above current levels at the 200-day SMA of 5.015%. I would use this as a "benchmark" to the Dow, SPX and OEX, all which are trading at or just under their 200-day SMA. Should the longer- dated 30-year YIELD clear its 200-day SMA, then I would expect the Dow, SPX and OEX to make the move above their 200-day SMA.

Jeff Bailey

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