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Index Wrap

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Weak economic data on the jobs front helped trigger some profit taking in the major indexes today. While a positive viewpoint regarding an economic rebound later this year from Fed Governor Beranke had the indexes lifting from their lows of the session, Treasuries were today's "index winner" and Treasuries found a strong round of buying.

March durable goods orders came in much stronger than expected, but one has to wonder if the "lag" we noted in last night's Index Trader wrap regarding Treasuries YIELDS and lack of selling has the bond market more concerned about some type of rebound in job growth that could eventually broaden consumer spending. An unemployment check only goes so far these days, and for many, even the unemployment checks have expired.

Today's trade saw brisk volume, but levels were down from yesterday's trade as the NYSE turned just over 1.47 billion shares. For the first time in four trading session, decliners outnumbered advancers, as breadth was negative at 18 to 13. The big board reported 131 stock trading new 52-week highs compared to 22 stocks falling to a new 52-week low.

NASDAQ volumes equaled Tuesday's 1.55 billion, but today's breadth was negative with decliners getting the upper hand on advancers by a 17 to 13 margin. Signs of leadership continue to hold as 145 stocks traded a new 52-week high compared to 29 stocks trading new 52-week lows.

Technology bulls may feel like its the late 1990's again when they hear that NASDAQ-100 component Citrix Systems (NASDAQ:CTXS) $18.16 +17.68% rose to a notable 52-week high and helped keep the NASDAQ-100 Tracking stock (AMEX:QQQ) $27.48 -0.54% near the unchanged level.

Sector action was broadly negative in today's session and stayed that way from the opening bell. Upside sectors had the Biotechnology Index (BTK.X) 364.17 +1.66% finishing today's trade as the sector gainer, while the Utility Sector Index (UTY.X) 260.58 +1.51% and HMO Index (HMO.X) 559.43 +1.15% were the only other sectors posting gains greater than 1%.

The Gold/Silver Index (XAU.X) 66.16 -4% was today's sector loser after a 2-day test of its longer-term 200-day SMA at 69.00, meanwhile the June Gold futures contract (gc03m) $335.50 +1.08% gained $3.60.

While just one day's observation, the decline in gold stocks and buying in Treasuries is a trade that depicts lackluster to modest economic growth with little inflation attached.

Action in our Pivot Analysis Matrix had the 10-year YIELD ($TNX.X) falling to trade its WEEKLY S1 of 3.893% with a session low trade of 3.905. Meanwhile, the Dow Industrials was the only index to close back below its WEEKLY R1.

From the DAILY levels where we found correlation from, the S&P 100 (OEX.X) 462.95 -0.93% found a "suspicious" daily low at today's DAILY S2 of 460.20 and WEEKLY R1 of 459.10, with a daily low of 460.17.

Somewhat similar to Wednesday morning's trade, the NASDAQ-100 Index (NDX.X) traded either side of its WEEKLY R1 of 1,103, which was correlative with today's DAILY S1 of 1,101.3 and did breach this level during the morning session with an NDX low of 1,097.19.

The S&P Banks Index (BIX.X) 286.34 -1.2% found support just above our more formidable near-term correlation of 284.60, but did pierce and close below our tentative (dashed green) correlative support of WEEKLY R1 and DAILY S1 of 287.30 and 287.11. I say "tentative" as the 287 level was traded to the downside and pierced on Wednesday.

Let's take a quick look at tomorrow's pivot analysis matrix.

Pivot Analysis Matrix

Today's "negative" in my opinion was further buying in Treasuries. I would have to assume the bond market wasn't as impressed/convinced regarding the March durable goods data as it was concerned about the state of the jobs market. I left the DAILY S2 and S1 levels of the 10-year YIELD "blue" only to show that they were traded today, and with multiple correlations of YIELD support at/near the 3.82% level another round of buying in Treasuries like we saw today, may not necessarily find the indexes trading with "fractional" losses like they did today.

I will make a technical note here as it relates to the 10-year YIELD bar chart. Today's low YIELD of 3.878%, just barely pierced below the WEEKLY 19.1% retracement level, which marks the lower end of our "zone of support." The upper-end of this "zone" of support is the WEEKLY S1 of 3.893%. This "zone" of support has been holding YIELD support since April 2nd.

In "pink" I've made some observation of today's lows in the OEX, NDX, QQQ and BIX.X and tied them in with some levels from the matrix. Don't expect bulls with full positions to simply sit around on their hands if these levels get violated tomorrow. The "tie" with the OEX low of 460 today, shows initial support at the DAILY S1 and WEEKLY R1. A bullish trader holding full or 3/4 positions and has yet to book any type of gain from the bull run lows, then a nice stop would be just under these levels. Next correlative support that shows up is found at MONTHLY R1 and DAILY S2.

S&P 100 Index Chart - Daily Intervals

Don't forget, that Treasuries were seeing buying before this morning's weekly jobless data was released. I didn't mention this earlier, but they were. Most likely, there was some SARS virus new built into that. I can't say that today's slip back below WEEKLY R2 is BEARISH. Near-term support now slips from WEEKLY R2 of 464.60 to 459 while near-term resistance would be the 468.81 level from 19.1% retracement.

We're going to look at the S&P 500 Chart on an intra-day basis in a minute where I hope to show how the WEEKLY R2s for the SPX and OEX came into play on an intra-day basis after being broken in the opening minutes of trade.

Today's action inside the S&P 100 Bullish % ($BPOEX) did see a net loss of 1 stock to a new point and figure sell signal. This has the bullish % slipping 1% from a cycle high of 53% to 52% at today's close. Nothing major here and it would currently take a reversal to 46% to have the bullish % slipping back into "bear confirmed" status from the current "bull alert" status. Still, to keep that reversal from happening, I still think bulls will need some selling in Treasuries.

S&P 500 Index Chart - 10-minute intervals

Here's a 10-minute interval chart of the SPX, which encompasses all of this week's trade so far. Try thinking like a computer as it relates to the levels. For instance, imagine you BOUGHT on break above WEEKLY 38.2% on Tuesday after WEEKLY pivot held. Stop goes just under WEEKLY pivot. Then, WEEKLY R2 is broken and you BOUGHT additional position. Stops moved up to just under 904. Then WEEKLY R2 is traded. SELL first position from 892.95, HOLD second position from 904. Then on break above WEEKLY R2, BUY additional position, STOP just below 904.

Now... I'm not necessarily saying this is how every human trader is trading the SPX, but it may be how computers are trading it. Do you see how SO FAR once a level has been broken to the upside, the next level below has NOT been traded or broken? Even on Monday, when the SPX wavered either side of the 892.95 level, the WEEKLY pivot level (next level lower) was never violated. Why? Evidently because computers or at least the MARKET was accumulating stocks!

Today's trade saw the S&P 500 Bullish % ($BPSPX) see a net gain of 3 stocks to new point and figure "buy signals." Hey! The OEX lost one, but the broader SPX gained 3? So... I envision 1 large cap seeing a sell signal, but 4 mid-tier SPX stocks finding buy signals for a net gain of 3. This has the S&P 500 Bullish % ($BPSPX) growing to 54.2% and a cycle high for this bullish %.

NASDAQ-100 Tracking Stock (QQQ) - 10-minute intervals

Here's a 10-minute interval chart of the QQQ. Now, one trader sent me an e-mail today and asked why the QQQ and SPX traded so similar today, almost as if they were tracking identically. I see some technical difference in the QQQ compared to the SPX. I didn't extend tomorrow's DAILY S1 all the way to the left on the chart, but we can "eyeball" that level and see that it has been a level of support back to Wednesday morning. If the QQQ breaks today's high, should get another leg of short-covering up to $27.92 and WEEKLY R2.

Today's trade saw no net change in the NASDAQ-100 Bullish %. Still bull alert at 65%.

I'll show a chart of the Dow Industrials tomorrow morning as it may be useful with the economic data and MARKET reaction before the bell.

Today's trade did see a net loss of 1 stock to a new "sell signal" in the very narrow Dow Industrials Bullish % ($BPINDU) and has the bullish % slipping back 3.33% to 50%. So.... per last night's Index Trader wrap and past coverage of the Dow Industrials point and figure chart, I'd keep a bullish stop just under 8,250. Today's trade didn't see a 3-box reversal on the point and figure chart, but resistance will be formidable at 8,550 if we don't get some cash from the bond market SOON!

Jeff Bailey

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