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Mixed trade on profit taking

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The major indexes trade mixed to lower after this morning's higher open on what looks to be some profit taking after Morgan Stanley said it would look to take some gains off the table in both its equity and bond market exposure by trimming equity exposure by 5% and bond exposure by 5%, placing those funds in cash. While Morgan Stanley said its call was not to be construed as "bearish" on the markets, the S&P 500 Index (SPX.X) 1,009.35 -0.13% had reached the firms bullish annual target.

Further economic data released at 09:15 PM EST had May industrial production rising 0.1%, which was inline with economists' forecast of unchanged. Capacity utilization at the nations factories stood at 74.3%, which was also inline with forecasts of 74.4%.

In last night's Index Trader Wrap, I thought traders should have their buy/sell program premium alerts set for this morning's trade. I received one buy program premium alert right at the market's open and this was expected as cash markets caught up with futures. Then, approximately 5-minutes later, I received one more buy program alert at SPX 1,012, which helped the SPX to a session high of 1,104, but that has been it for any buy/sell program premium alerts. Since the second buy program alert came in what appears to be "no man's land" as it relates to anything I see in the DAILY/WEEKLY/MONTHLY pivots, I'm left to assume for now that current morning trade is simply some shorter-term type of profit taking after a nice move higher yesterday.

In recent sessions, we've noted that the NASDAQ-100 Index (NDX.X) 1,236 -0.41% has been "lagging" in the WEEKLY pivot levels, and this morning's low for the NDX has been 1,229.73, which comes very near the WEEKLY R1 of 1,230. I'm observing this as a rather important near-term level of support from INDU/SPX/OEX traders as they are still well off their WEEKLY R1s of 9,253/1,003/505. Should the NDX slip much below today's lows, then I would think INDU/SPX/OEX traders begin assessing further weakness to their WEEKLY R1.

Current levels of trade Have the Dow Industrials (INDU) 9,308 -0.11% down 10 points. The broader S&P 500 Index (SPX.X) 1,011 +0.1% is gaining fractionally, while the narrower S&P 100 Index (OEX.X) 510.36 +0.2% holds a 1- point gain.

Sector action among non-tech finds the Drug Index (DRG.X) 345.76 +1.86% and Gold/Silver Index (XAU.X) 80.69 +1.62% leading sector winners, with the Oil Index (OIX.X) 281.88 -0.73% and Dow Transports (TRAN) 2,479 -0.63% exhibiting morning weakness.

The NASDAQ-100 Index (NDX.X) 1,238 -0.22% and Tracking Stock (AMEX:QQQ) $30.80 -0.25% see weakness from biotechnology as depicted by the Biotechnology Index (BTK.X) 480 -1.35%, with the CBOE Internet Index (INX.X) 138.66 +1% showing strength among technology.

Treasuries are seeing selling across the major maturities with the shorter-dated 5-year YIELD ($FVX.X) rising 7.5 basis points to 2.186%, while the longest-dated 30-year YIELD ($TYX.X) rising 6.7 basis points to 4.288%. In the "belly of the curve," the benchmark 10-year YIELD ($TYX.X) is up 6.6 basis points to YIELD 3.236%.

Market internals at the 11:00 hour at the NYSE have decliners outnumbering advancers by a 17 to 12 margin, while NASDAQ shows similar negative breadth of 16 to 11. The NYSE reports 248 stocks having traded new 52-week highs compared to 2 stocks trading new lows, while NASDAQ has 167 stocks at new highs compared to 2 stocks at new 52-week lows.

Jeff Bailey

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