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Bulls show little fear as indexes push higher

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Despite word that a white powdery substance was discovered at Tacoma, Washington mail distribution center that had initial tests suggesting the powder was some type of biotoxin, stocks held their ground in positive territory. The Tacoma fire department has since reported that 4 of 5 tests it has performed on the powdery substance have come back negative and that results of the 5th test are due back within an hour.

That news looks to have fueled bullishness as the Dow Industrials (INDU) 8,407 +0.94% pushes to a session high with a 78-point gain, reversing a morning loss of 66 points.

The S&P 500 Index (SPX.X) 904.61 +1.41% has traded our WEEKLY S1 level of resistance, which now finds earlier buying in Treasuries now at unchanged levels. This morning's trade at 900 in the SPX triggered a "bullish triangle" pattern that we had been monitoring and gives further hint that demand continues to outstrip supply for stocks.

I've suggested that swing-trader bulls look to take some profits off the table at current levels as the WEEKLY R1 was a level I thought we might some profit taking. More aggressive bulls may wish to continue following with a stop at the 874 level as outlined in last night's Index Trader Wrap, and SPX's point and figure chart.

Selling really came into Treasuries at approximately 11:40 AM EST, when the 10-year YIELD ($TNX.X) 3.981% +0.05% jumped higher from selling at the 3.95% YIELD level after the National Journal reported that President Bush would reappoint Alan Greenspan as Fed Chairman.

While "good news" is found on early test results out of Tacoma, WA, and news that President Bush will reappoint Mr. Greenspan, news out of Iraq that a production facility is up and running and currently producing 10,000 barrels a day, with an addition ramp to 50,000 barrels per day by tomorrow, has crude futures falling here with May Crude futures (cl03k) $30.23 -2.07% falling 64 cents, while the June Crude futures contract (cl03m) slides 73- cents lower at $28.10.

That news had the Dow Jones Transportation Average (TRAN) $2,336 +1.67% breaking to an afternoon high. Transport gains are being spurred by shipper United Parcel Services (NYSE:UPS) $59.62 +3.02% after reporting Q1 earnings this morning that beat Wall Street's estimates by 3 cents a share. The ground/air shipper said it saw Q2 EPS of $0.58-$0.62 per share, which was also ahead of analyst's estimates of $0.57.

Further bullishness is found on a broader scale as the NASDAQ- Composite (COMPX) 1,442.85 +1.29% breaks to a multi-month high and now looks to challenge this year highs set in early January of 1,467.35. Current resistance may be found at these levels with the 19.1% retracement of 1,442.78 coming into play. After a successful double-test of 61.8% retracement in February and March, I would think a test of the December highs of 1,521 is in play in the week's ahead.

Similar to the NASDAQ Composite, the very broad NYSE Composite (NYA.X) 5,072 +1.33% is building gains to a multi-month high. This morning's break to relative highs at 5,033 looked to have triggered further bullishness and today's trade at 5,020 also "uncorked" a bullish triangle pattern and has sent this broad market index firmly above and through is longer-term downward trend of bearish resistance, which was also at the 5,020 level. From here, the first sign of weakness would be a trade at 4,920.

A quick look at market internals has the NYSE volume at just over 826 million shares. Advancers now outnumber decliners by a 21 to 10 margin with 141 stocks trading new 52-week high versus just 23 stocks trading new 52-week lows. Bulls like to see the 52-week high/52-week low indicator showing a stronger advance than yesterday's yearly record of 136 new 52-week highs and this action certainly hints this market is finding leadership and demand outstripping supply.

NASDAQ volume has just breached the 826 million mark with advancers outnumbering decliners by a 17 to 11 margin. 101 stocks have traded a new 52-week high compared to 23 stocks having traded new 52-week lows. Here too we saw yesterday's 147 new 52-week highs a 2003 high level. Yesterday at this time, the NASDAQ reported 119 stocks having traded new 52-week high.

Jeff Bailey

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