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Off their lows as sentiment improves

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The major indexes are off their lows, but still drip red after some "selling of good news" took place earlier this morning with the 09:45 AM EST release of the preliminary May University of Michigan Sentiment, which jumped to a reading of 93.2, which was well above economist's forecast of 87.0.

In today's 11:00 AM EST Update at OptionInvestor.com, I did say "sentiment improved markedly in April," and while today's preliminary release is for the month of May, I do feel this report is more reflective of April sentiment, if not that latter half of the month.

Current trade has the Dow Industrials (INDU) 8,693 off just 20- points after trading a session high of 8,742 just after the release of Michigan sentiment, but now well off its lows of 8,644.

The broader S&P 500 Index (SPX.X) 944.16 is lower by 2.5 points with sector action mixed. Sectors showing strength in today's session have the HMO Index (HMO.X) 634.75 +2.2% leading sector gainers, with the North American Telecom Index (XTC.X) 477.58 +1.6%, CBOE Internet (INX.X) 128.31 +1.45% and Utility Index (UTY.X) 273.15 +1.35% showing gains of better than 1%.

Shares of PacifCare (NASDAQ:PHSY) $37.41 +1.13% have traded a new 52-week high in the HMO's, eBay (NASDAQ:EBAY) $99.52 +1.45% are at a new 52-week high for the Internets and look "destined" to trade the psychological $100 level (there's an old saying that 90% of stocks that trade $90 on a new high, trade $100 as it's a psychological target for further bullishness).

Sector weakness has the Dow Jones Home Construction Index (DJUSHB) 385 -2% leading sector weakness with the Semiconductor Index (SOX.X) 352 -1.89%, Airline Index (XAL.X) 42.98 -1.6% and Biotechnology Index (BTK.X) 404.85 -1.14% sectors showing losses greater than 1%.

Late yesterday, the Semiconductor Association's book-to-bill ratio for April was released. In last night's OptionInvestor.com market monitor, Jim Brown quickly discussed the release.

Market Monitor Comments - Jim Brown 05/15/2003

Jim always does a good job explaining how the "final" book-to- bill number is established. It's not simply a one-month reading, but a 3-month average. As Jim explains, for the average to have fallen to $737 million, then actual bookings for April most likely fell to approximately $675 million.

Yesterday, Andy Bryant of Intel (NASDAQ:INTC) $19.69 -1.55% said he hasn't seen anything in Intel's business at this point that signals economic recovery, but he is looking for a strong rebound in 2004.

The weakness in Intel as well as the sector has the NASDAQ-100 Index (NDX.X) 1,153 -0.8% leading today's major index declines, but both the NDX and QQQ $28.67 -0.68% continue to hold firm at their MONTHLY R1's of 1,149.90 and $28.59 respectively, so at this point, I can't say that today's trade in either is overly indicative of alarming weakness. Still, with the NASDAQ-100 Bullish % ($BPNDX) from www.stockcharts.com at 77% after having reached 79% earlier this week, this index of stocks is at more "overbought" levels and caution is advised to bullish traders.

As I type... shares of previously profiled SPECULATIVE bullish in Geron Corporation (NASDAQ:GERN) $5.45 +6.8% have traded the $5.50 level and this trade at $5.50 now has its PnF chart triggering the "bullish triangle" pattern. I rate this stock as SPECULATIVE as it is in the early stages of testing developed drugs that show promise for treatment of cancer, but has no revenues. However, as noted in past commentary and discussed earlier today in the OptionInvestor.com market monitor, technicals look to be unfolding to the bullish side.

Here are a couple of charts of GERN that I've shown in the market monitor today as well as one previously. While the technique of using MONTHLY and WEEKLY pivot analysis levels was demonstrated in GERN, I'm also hoping that traders could use this technique for assessing important support and resistance levels in other stocks they are trading.

Geron Corporation (GERN) - Daily Interval

This is a chart of GERN I was showing earlier today, where the stock was once again encountering a level of resistance that I felt important to break above. In past comments, we also noted the POTENTIAL for a "bullish triangle" pattern in GERN's point and figure chart.

Here's a look at an "old" chart of GERN with WEEKLY and MONTHLY retracement. As each week has passed, we begin to note how the levels of support and resistance have actually moved higher. This could be viewed as bullish.

Geron Corporation (04/30/03 capture) - Daily Intervals

We first profiled a bullish trade in GERN back in late March on a break above $4.00 and bulls got a wild ride to above $7.00. As the stock has pulled back, some consolidation takes place. True, the more bullish market environment should tend to attract bullish traders to the stock, but for the September $5 calls I've previously profiled and still hold, what I really want to see is some institutional accumulation and their "hopes" or conviction that a new drug to cure cancer tumors from GERN has potential. With these more "speculative" stocks, and me not being a biochemist, I must rely on the charts technicals to tell me what to do. I like GERN for an aggressive bull, but I'd follow with a stop just below $4.00.

Jeff Bailey

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