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Trading curbs in place

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Program trading curbs were put in place at approximately 11:40 AM EST when the Dow Industrials (INDU) 9,255 +1.5% traded 150-points above Friday's close at 9,267.12 in today's session, and since that time, the major indexes have been holding gains, just off their session highs. A quick look at Dow breadth shows all 30 components trading with gains as aerospace/defense contractor Honeywell (NYSE:HON) $28.63 +2.76% and building products retailer Home Depot (NYSE:HD) $34.49 +2.7% lead the Dow to a new 2003 high, but still off what would be a 52-week high dating back to June 19, 2002 of 9,733.39.

Sector action continues to hold broadly positive with the Oil Service Index (OSX.X) 93.97 -2.49% today's loan sector decline of 2% or more, with the Natural Gas Index (XNG.X) 199.39 -0.46% trading either side of unchanged, but lower now with weakness in energy futures markets. Weakness in the oil services and natural gas group comes as RBC Capital Markets said it would become more cautious on the near-term outlook for oil service due to recent negative gas injection trends and their assessment of reduced risk/reward profiles and historical seasonal trading patterns.

Sector strength is broad with many sectors still holding gains of better than 2%. The Biotechnology Index (BTK.X) 482.41 +2.83% has backed off its session highs of 485.22, with the Dow Jones Home Construction Index (DJUSHB) 477.82 +2.45% providing the first-half of today's trade sector winners.

The broader gains found among sectors has the S&P 500 Index (SPX.X) 1,003 +1.45% holding a 14.3-point gain and hovering at our WEEKLY R1 level in the pivot matrix after reaching a session high of 1,006.03, which was just shy of the June 6th 2003 high of 1,007.69. The narrower S&P 100 Index (OEX.X) 505.60 +1.56% has been able to break above its June 6th relative high of 505.17, with some greater weighting in financials as both the S&P Insurance Index (IUX.X) 276.43 +2.08% and S&P Banks Index (BIX.X) 312.44 +1.51% lead financial sector gains.

Technology-sectors, which started today's session out mixed, are now painted green with the Semiconductor Index (SOX.X) 370 +2.48% reversing fractional losses at the opening bell after Bear Stearns made cautious comments on Analog Devices (NYSE:ADI) $34.75 +0.87%, which sent that stock to a morning low of $33.55. While Bear Stearns said its channel checks indicated that booking were still healthy for higher performance analog components, their checks hinted that demand was flattening out after a strong start to the year, which could cause revenues to flatten out into the second-half of 2003.

Broader market internals had been building positive since the opening bell, but have evened out at the 01:00 PM EST mark.

The NYSE reports 656 million shares trading hands with advancers outnumbering decliners by a 22 to 9 margin. 319 stocks have traded new 52-week highs compared to 5 stocks having trading new 52-week lows.

NASDAQ volume is just over 1.03 billion shares, with advancers outnumbering decliners by an 18 to 11 margin, which is off a little from its 12:00 PM EST mark of 18:10. 176 stocks have traded new 52-week high, while 9 stocks have traded new 52-week lows. In this morning's market monitor at OptionInvestor.com I made note that today's 9 stocks at new 52-week lows currently matches 9 52-week lows dating back to May 30th. On May 30th, NH/NL breadth finished the day at 257:9. While this isn't overly concerning to bulls at this point, Friday's trade did see a net loss of 2 stocks to new point and figure sell signal in the NASDAQ-100 Bullish % ($BPNDX) to 87%, which is starting to edge back from bullish cycle highs of 91%. It would currently take a 68% reading for this bullish % to reverse into "bear alert" status from these higher levels of bullish risk.

Jeff Bailey

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