Option Investor
Market Updates

Technology weakness offsets financial's strength

HAVING TROUBLE PRINTING?
Printer friendly version

Technology stocks remain under pressure and have seen a slow drift lower with the tech-laden NASDAQ-100 Index (NDX.X) 1,047.50 -1.5% weighing on otherwise fractional gains in the S&P 500 Index (SPX.X) 877 (unch), S&P 100 Index (OEX.X) 445 (unch) and Dow Industrials (INDU) 8,241 (unch).

The Biotechnology Index (BTK.X) 344 -4.08% suffers a setback today after biotech-equipment maker Affymetrix (NASDAQ:AFFX) $18.09 -35% warned on Q1 earnings. For sector bulls, the warning probably couldn't have come at a more inopportune time as the Biotechnology Index (BTK.X) had just approached its bearish resistance trend of 360 on its point and figure chart (10-point box scale) and threaten to trade 380, which would have negated the "bearish triangle" pattern from February. While AFFX's news will be a setback for other biotech-equipment makers near-term, a quick look at the sector bellwether Amgen (NASDAQ:AMGN) $59.25 -0.25% has the stock holding tough in an otherwise negative sector trade.

According to Dorsey/Wright and Associates, their biotech sector bullish % (bpbiom) remains in "bull corrections" status at 29.11% and today's news from AFFX will most likely bring some caution from sector bulls as they digest and assess the news from AFFX.

The GSTI Software Index (GSO.X) 102.66 -2.81% is seeing a lower trade and just slipping to session lows. I wanted to monitor shares of PeopleSoft (NASDAQ:PSFT) $14.75 -10.54% today and in coming sessions to try and judge a market response to their earnings warning from last night. While we "knew" the stock would trade lower today, "how low" and "how disgusted" the market would be with the stock over the next couple of weeks may give traders a read on the MARKET's perception of risk with other technology stocks that will be dependent on corporate spending. While it "should have been" factored into trader's assessment for risk with technology that corporate spending would be further delayed due to "war with Iraq" a warning from PSFT gives traders and investors a good stock to follow (not necessarily trade) in coming weeks to get a pulse on how the MARKET may view technology stocks in the session's to come.

Sector bellwether Microsoft (NASDAQ:MSFT) $25.03 -2.72% perhaps sees some "sympathy trade" with PSFT today, while a stock like SAP Aktiengesell (NYSE:SAP) $19.73 -4%, which is a chief competititor to PSFT is hit lower and shows more of a direct tie. Oracle (NASDAQ:ORCL) $11.34 -2.40%, which has seen PSFT and SAP take market share in the customer relationship management (CRM) and human resource management (HRM) software business, also sees weakness.

Financials are showing some gains today, and this is helping the S&P 500 and S&P 100 hold near unchanged levels. Yesterday I made bullish comments regarding Goldman Sachs' (NYSE:GS) $71.99 -0.49% point and figure chart, which showed the stock breaking above its bearish resistance trend. Another "financial" stock I've been monitoring in recent weeks for bullishness, which really hasn't been renewed until today is shares of Dow component American Express (NYSE:AXP) $35.27 +1.73%. I took note of the stock having traded $37 on March 20, and also breaking above its bearish resistance trend. I really was looking for the stock to firm at $34, but a dip earlier this week to $33 found support and newly developing bullish support trend, and today's move has the stock looking to try and build a 3-day hold above its starting to round out 200-day SMA.

I'm trying to make some ties for "financial" stocks like GS and AXP as stocks that are breaking above bearish resistance trends (deemed longer-term bearish, when broken can represent a change of posture from the market toward bullish) and how GS and AXP are also beginning to recapture their 200-day SMA's (deemed a longer- term moving average). Both of these stocks saw "volume increases" on initial breaks above 200-day SMA, which to me hints that bulls and bears did some buying at this closely watched/monitored moving average. I've found that when I see "combined" breaks of longer term bearish resistance and 200-day SMA, a continuation move higher from these trends becomes a longer-term move for bullishness. Right now, both of these stocks would be deemed "early signs" of some longer-term bullishness beginning to develop.

Sector action for financials has the S&P Banks Index (BIX.X) 273 +0.6%, KBW Bank Index (BKX.X) 742 +1%, Securities Broker Dealer Index (XBD.X) 409 +0.42% and S&P Insurance (IUX.X) 244 +1.5% holding gains.

Jeff Bailey

Intraday Update Archives