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Time Warp

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Until the last few minutes of trading, this week has felt as if there's been a time warp, carrying market participants back to late 1999 and early 2000 when a tech conference, an upgrade, or a raising of earnings projections was good for solid gains on the day. As an example, manufacturing-related software applications developer QAD (QADI) today raised earnings expectations to $.10-.13 on revenue of $55-46 million, from expectations of breakeven results on revenue of $50-53 million. As of 2:45 ET, the stock had climbed 11.17% on almost three times average volume. This feels like the old momentum-trading days.

Also today, the U.S. Piper Jaffray tech conference takes place, with the SSB tech conference scheduled for tomorrow. As I mentioned in the OIN Market Monitor, Siebel Systems presented at 9:40 ET at the Piper Jaffray conference. Shortly afterward, the stock began climbing, reaching a new day's high at about 11:20, at which point it consolidated before attempting to close the gap down on Monday morning. That attempt resulted in a move all the way up to the top of the gap, with a day's high at $9.47 before the recent retracement back to midday support.

Delving deeper, however, it's not clear whether SEBL's presentation powered the stock higher or whether COMPX carried it along in what was after all a natural and expected gap-fill test. The volume appears to be setting up to be slightly lower than ADV, for example, and hourly OBV showed a flattening indicator rather than a rising one today. The ADX indicator did indicate a rise in buying pressure and a decrease in selling pressure, however, so perhaps the evidence might be deemed mixed.

As a result of its internal investigation and an SEC inquiry into an April 30 dinner attended by a company officer, investors, and analysts, after which the stock gained 8% the next day, SEBL declared that it would stop holding individual meetings with investors. Perhaps that's a bit after the horse escaped the barn, however, especially since SEBL already holds the distinction of being the first company to agree to pay a fine imposed due to a Reg FD violation. That news of the investigation resulted in Monday's gap down.

Also contributing to the late 1999/early 2000 deja vu feeling was the late-morning shrugging off of the second highest GDP, the car bombs targeting compounds housing Westerners in Saudi Arabia, and the early dips in the market themselves. In what has become a pattern for the last few days, volume patterns did an about-face midmorning, although they now seem to be reverting to the earlier patterns. As of 2:45 ET, total volume was just over 1 billion shares for the NYSE and just over 1.4 billion for the Nasdaq. Declining issues have now pulled slightly ahead of advancing issues, and down volume outnumbers up volume on the NYSE. Up volume still outnumbers down volume on the Nasdaq, perhaps showing some concentrated buying in a few issues.

Although volume patterns have tended to shift, they've still been the best predictor of short-term direction this week, as VIX and VXN levels, bond prices, gold prices, and dollar prices have often traded counterintuitively to the direction the markets headed. Currently, though, they're falling more in synchronization, with the major indices all down, bonds up, and the VIX and VXN levels up on the day. Most indices are currently down less than 1%, but the SOX (down .99%), Morgan Stanley Early Cyclical Index (XE, down 1.05%), and XAU (down 1.25%) are near or at 1% drops. The Oil Services Sector (OSX, up 2.01%) is the only sector on my list trading up more than 1%.

Linda Piazza

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