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Factory orders fall 2.9% in April

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The major indexes are showing fractional gains with the Dow Industrials (INDU) 8,991 -0.53% off 48 points and the broader S&P 500 Index (SPX.X) 982.75 -0.35% lower by 3.5 points as today's last bit of economic data showed factory orders falling 2.9% in April after a 2.2% gain in March.

The 2.9% decline in April's factory orders was the biggest drop since November 2001 when factory orders plummeted 4.1%.

The Commerce Department said the key nondefense capital goods component fell 0.1%, which shows this part of the manufacturing economy has not yet revived.

Sector action today is mixed to lower with the Gold/Silver Index (XAU.X) 76.70 +2.13% breaking above the 76.00 level, which has been discussed in prior commentary as a level where I expected a potential short squeeze to build on my thinking that a MASSIVE head/shoulder top pattern with a "left shoulder" peak at 77.34, if violated to the upside on the potential "right shoulder," which the XAU.X had been forming, now looks to have the pattern negated. In Tuesday evening's Index Trader Wrap we looked as several "intra day" head/shoulder top formation, when negated on a break above the right shoulder appeared to create decent little moves to the upside after the false pattern was violated. With the much larger head shoulder top pattern in the XAU.X looking to be violated and sector bullishness building in past weeks, this is a sector I've felt some momentum traders could focus. Sector bellwether Newmont Mining (NYSE:NEM) $31.51 +2.07% traded $31 yesterday and bulls that initiated partial positions just above $26 on initial profile can look to round up their positions on today's sector bullishness.

Other sectors finding gains of greater than 1% have the Dow Jones Home Construction Index (DJUSHB) 448.82 +1.4% surging to yet another all-time high, while the Airlines Index (XAL.X) 49.91 +1.91% continues its move higher after breaking out of a 9-month base yesterday. The Biotechnology Index (BTK.X) 471.82 +1.64% finds gains and looks to challenge Monday's highs of 475.22. Shares of ICOS Corp. (NASDAQ:ICOS) $36.34 +11% appear to be today's driver for the biotech sector. While ICOS is not a component of the BTK.X, new that it along with Eli Lilly (NYSE:LLY) $59.20 -1.64% reported a successful test of it oral treatment for erectile dysfunction drug Cialis.

The boost from biotechs finds some sector exposure in the NASDAQ- 100 Index (NDX.X) 1,217 -0.62% offsetting losses from the Semiconductor Index (SOX.X) 387.17.

Jeff Bailey

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