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Afternoon recovery looks to retreat

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The major indexes looked to find buyers just after the lunch hour, but the rally attempt into the 02:00 PM EST hour now finds the indexes back at their session lows and giving a mixed to higher look for today's session.

The Dow Industrials (INDU) 9,104 +0.69% still hold a 61-point gain after an afternoon rally attempt back to the 9,150 mark, but more notable perhaps was selling at the round-number of 500 in the S&P 100 Index (OEX.X), which now holds a 2.5-point gain at 497.59, which is still above today's session low of 496.58, which came right at a pullback test of our WEEKLY R2 of 496.67. While bulls have enjoyed a very positive trade in the indexes, I do think a bull would like to see the OEX hold above the 497 level and hold onto some of today's gains.

Biotechs as depicted by the Biotechnology Index (BTK.X) 482.67 -1.76% battled back to the unchanged levels this afternoon, but encountered intra-day resistance from a "b-pattern" intra-day consolidation near 494.50, and it certainly appeared to me that some seller were monitoring that level for any resistance, and when the turn lower was found, the Biotechnology Index (BTK.X) fell quickly back to its lows of the session.

In a first response to Oracle's (NASDAQ:ORCL) $13.15 -1.57% unsolicited bid for rival PeopleSoft (NASDAQ:PSFT) $18.04 +19.41%, PeopleSoft management issued a brief press release saying that "Oracle's bid shows atrociously bad behavior, from an atrociously bad company." PeopleSoft and Oracle enjoy a bitter rivalry, not only in product offerings, but at the CEO level. Shares of JD Edwards (NASDAQ:JDEC) $13.47 +5.31% have rebounded from their session low of $12.83 on PeopleSoft's comments. I'm thinking this action is greatly due to some short-covering or near-term hedges being removed as JDEC might, and still might be, vulnerable to lower price should their deal with PSFT be at risk of not going through. The reason I say this, is that it is often felt among trader and investors that when a company is willing to agree to a merger at significantly lower levels than historical trade and at small premiums to prior market close, that traders and investors observe that there must be some type of "trouble" that the to-be-acquired company may see as being to difficult to overcome on its own, and therefore agrees to be acquired.

Sector action at the 03:00 PM EST mark looks to be deteriorating into the close with the Dow Jones Home Construction Index (DJUSHB) 444.65 -2.37% still holding today's "sector loser" spot, with the Disk Drive Index (DDX.X) 106.60 -1.89% and Combinded Telecom Index (IXTCX) 145 -1.77% offsetting gains in the HMO Index (HMO.X) 685.5 +2%, GSTI Software Index (GSO.X) 131.86 +1.79%, Health Provider Index (RXH.X) 279.11 +1.2% and Securities Broker/Dealer Index (XBD.X) 534.20 +1.11%.

Jeff Bailey

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