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Dow Industrials seeks out near-term support in morning trade

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The major indexes have been under selling pressure in the first 90-minutes of trade with the Dow Industrials (INDU) 8,369 -1.3% lower by 110 points, but just off its lows of 8,340 as a weakening labor market weighs on investor's minds.

The Dow's morning low of 8,340 came right at our correlative support levels identified in last evening's Index Trader wrap at our new MONTHLY pivot of 8,339 and overlapping 38.2% conventional retracement. This morning's low is also correlative with the shorter-term 21-day SMA of 8,346. Analysis here is that there is most likely some shorts covering after the Dow hit a 3-month high of 8,559 on Tuesday.

I say this as I still think bullish cash is rather limited as Treasuries have seen another strong round of buying this morning. The benchmark 10-year YIELD ($TNX.X) 3.815% is currently down 3.8 basis points and just up from a morning low of 3.793%. In play as YIELD support right now is fairly "critical" YIELD support of 3.8%, which the benchmark bond's YIELD has not closed below since March 14, which correlated with the strong rebound in the equity indexes during that time.

10-year YIELD Chart - Daily Interval

Further buying in Treasuries has the 10-year YIELD ($TNX.X) falling to an important "YIELD support" level. While this bond's YIELD looks "overbought" near-term, it will attract attention from equity traders. Bears that have been more eager to cover on trading pullback will most likely begin to dry up if they see YIELD move lower as it is certainly a signal that bullish capital is seeking out another security, other than stocks.

I'm also keep an eye on the Pacholder High Yield Fund (NYSE:PHF) $8.20 -0.24%, which is a "junk bond" closed-end fund. I'm not seeing "significant" selling in today's session, despite this security's torrid 33.12% gain since its December 31st close. I view the "junk bond" market as a bond market where investors would take on greater risk for a higher YIELD, but only on thoughts of an economic recovery that would have higher risk balance sheets firming up and strengthening.

Other major index action has the S&P 500 Index (SPX.X) 905.32 - 1.26% holding above the psychological 900 level after a morning low of 902.83. Serving support here on a weekly basis is this WEEK's pivot of 901.8. As a comparison, the Dow did trade through its WEEKLY pivot of 8,365 earlier this morning.

The narrower S&P 100 Index (OEX.X) 459 -1.32% is off 6 points here after a morning low of 458.33. Serving support early on has been the WEEKLY pivot of 458.11 and our "zone of support" from MONTHLY and conventional retracement has not been tested, but with rolling lower Stochastics and a MACD that now threatens to cross below its Signal, this zone of support does look to be in play.

Non-tech sector weakness in today's trade has somewhat equally distributed weakness among the financials with the S&P Banks Index (BIX.X) 285.71 -1.28%, S&P Insurance Index (IUX.X) 257.12 -1.22%, KBW Bank Index (BKX.X) 779.82 -1.58% and Securities Broker/Dealer Index (XBD.X) 432.03 -1.5% all lower. Retailers as depicted by the S&P Retail Index (RLX.X) 292.8 -2.25% which would be very consumer sensitive (i.e. jobs data) lower, with the Forest and Paper Products Index (FPP.X) 273.02 -2.7% leading today's sector weakness.

The NASDAQ-100 Index (NDX.X) 1,095 -0.95% is off 10-points. All technology sectors are lower on the session, with the Semiconductor Index (SOX.X) 327.44 -1.52% leading weakness, with the North American Telecom Index (XTC.X) 439.7 -1.17%, Networking Index (NWX.X) 159.60 -1% and Biotechnology Index (BTK.X) 368.99 -1.13% as technology sectors showing losses greater than 1%.

The only sector I see in the green in this morning's session is the Gold/Silver Index (XAU.X) 67.80 +3.84%. Bullishness here is most likely found from a drop-off in productivity and a weaker dollar.

The U.S. Dollar Index (dx00y) 96.50 -0.7% traded a new multi-year low yesterday, and continues to show marked weakness again today at another new low.

For stock specific exposure to the gold group, I continue to like partial positions in Newmont Mining (NYSE:NEM) $27.88 +3.18% at current levels after a successful pullback into a starting to round out 50-day SMA of $26.17 on Tuesday, and move back above its flat 200-day SMA of $26.54. Support should now be firming at the $25.39 level and stops can be placed just under that level. I would expect some resistance to be found in the coming weeks at the $30.00 level.

Jeff Bailey

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