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Index Wrap

Dow presses 8,500 once again

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For the fourth time in just over a month, the Dow Industrials (INDU) 8,471 +1.98% recouped Friday's losses and once again traded the 8,500 level, but bulls ran out of time, and perhaps cash in an attempt to get this widely quoted index to the 8,550 level.

Dow breadth finished today's session with all 30-components in the green as better-than-expected quarterly earning's from McDonald's (NYSE:MCD) $16.93 +7.08% brought some strength from the bottom, while some resumption of longer-term strength from 3M (NYSE:MMM) $126.80 +3.17% after 5-consecutive sessions of declines last week, and a downgrade on Friday by Bank of America, helped lift the Dow from its longer-term 200-day SMA of 8,300 and rising shorter-term 21-day SMA 8,290.

Trading curbs were in place at approximately 11:00 AM EST when the Dow traded 150-points above Friday's close, and while volumes waned from last week's levels, the NYSE still managed to trade just over 1.25 billion shares, while the NASDAQ came close to Friday's 1.49 billion volume at 1.43 billion shares.

Market breadth was positive at the NYSE with advancers outnumbering decliners by a 3 to 1 margin. Meanwhile, 156 stocks traded new 52-week highs compared to 21 stocks trading new 52- week lows. The most bullish readings for 52-week high/low indications came on Tuesday of last week when the NYSE Composite closed at 5,101.81 and bulls most likely want to see further improvement in the 52-week high/low indicators (still quite strong) with the NYSE Composite ($NYA) finishing up 90-points (+1.8%) at 5,108 in today's trade. The NYSE Bullish % ($BPNYA) saw a net gain of 0.55% new point and figure buy signals in today's session, which has this VERY BROAD indicator of market internals growing to a bull cycle high of 50.55% and nearing January's cycle high levels of 53%.

NASDAQ breadth showed advancers outnumbering decliners by a 2 to 1 margin, with 147 stocks reaching new 52-week highs compared to 20 stocks trading new 52-week lows. On Wednesday of last week, the NASDAQ reported 162 new highs and 24 stocks at new 52-week lows. Today's 147 new high rivaled last Monday's 147. The NASDAQ Composite ($COMPX) finished today's session with a 27.7-point gain (+1.93) at 1,462 and just off Wednesday's highest close of the year of 1,466. A move above Wednesday's 2003 high of 1,468.08 still has the the January 13th relative high of 1,467.35 still has the December highs of 1,521.44 in play, and a move above that level would have a "technical" bull market in play as a series of higher highs and higher lows would have been traded. The VERY BROAD NASDAQ Composite Bullish % ($BPCOMPQ) saw a net gain of 0.35% and builds to a bull cycle high reading of 50.55%. Current levels of bullishness match those found in late November, but still off the 56% levels of bullishness found in May of 2001 and January of 2002.

A stronger U.S. dollar as depicted by the U.S. Dollar Index (dx00y) 98.64% showed some foreign assets being converted back into dollar-denominated assets couldn't have hurt equities today, while some slightly stronger selling in the shorter-dated 5-year bond, which had the June 5-year Treasury futures contract (fv03m) $113'135 -0.09% seeing more selling than the 30-year June futures (us03m) $113'130 (unch), finds a flattening YIELD curve in today's trade, which tends to bode well for equities.

Dow Industrials ($INDU) Chart - 50-point box

The Dow Industrials (INDU) 8,471 +1.98% finished just off their session highs of 8,501.66 and resistance below the 8,550 level remains intact into today's close. First sign of weakness would be a trade at 8,250. Bulls that played the "bullish triangle" pattern break higher at 8,450 can raise stops from 8,200 to 8,250. Bulls willing to give a little more room can match up the 8,200 level with this WEEK's WEEKLY S1 of 8,204.

Today's action saw no net change in the very narrow Dow Industrials Bullish % ($BPINDU). Still "bull alert" at 50% and would still take a reading of 62% to achieved "bull confirmed" status (each stocks chart is equal to 3.33%) while a reversal back down to 46% would be "bear confirmed."

S&P 500 Index ($SPX.X) Chart - Daily Interval

The SPX tested and traded through our correlative DAILY R2 and WEEKLY R1 intra-day, but wasn't quite able to hold that level into the close. With Treasuries finishing basically unchanged to modestly lower, I was impressed that the SPX was able to trade its WEEKLY R1 to begin with. In Friday's market monitor, I was looking for a morning trade near 894 then a rebound tomorrow back near 910. I do like bullish entries on a pullback near 884 as SPX internals continue to improve. A trade at 920 would be another "double-top buy signal and a break much above 922 leaves WEEKLY R2 in play. Stochastics are trying to roll from "overbought" and hints a pullback is coming. Bears say it can't come soon enough!

Note: "Pink" retracement is conventional (October low-December highs). "Blue" retracement is this WEEK's, while Red is this MONTH's (April) retracement from pivot analysis.

Today's trade saw a net gain of 3 stocks to new point and figure buy signals. Add that to Friday's net gain of 2 stocks and we've got the S&P 500 Bullish % ($BPSPX) growing 1% since Thursday's close of 54.20. This has the SPX bullish % growing to a bull cycle high of 55.2%, but still off the December high reading of 68%.

S&P 100 Index ($OEX.X) Chart - Daily Interval

Three levels appear at the 469 level tomorrow as resistance. The overlapping WEEKLY and Conventional (pink) retracement along with the DAILY R1 of 469.0. Last week we did see the OEX close just above current levels, then fall back into Friday's close.

Key economic number tomorrow morning at 10:00 AM EST will be the Conference Board's April consumer confidence with is forecasted at 70.00, compared to March's 62.5 reading. I've seen some economist's forecast as high as 76 and it might take that type of confidence reading to get the OEX above the 469 level. The bears have come out of hibernation and they look hungry to cover positions when new relative highs are violated to the upside. Aggressive bulls will press the issue on a move above 469.

Today's trade saw a net gain of 2 stocks to new point and figure buy signals. Add this to Friday's net gain of 1 stock and the narrower S&P 100 Bullish % ($BPOEX) grows to a bull cycle high of 55% at today's close. Still "bull alert" here and needs a reading of 62% to achieve "bull confirmed."

Treasuries sure seemed to find modest selling as stocks continued to bid as the session progressed. With Stochastics approaching "oversold" on the YIELD charts (overbought for price) something has to give as the equity indexes and YIELDS have been stretched apart.

NASDAQ-100 Tracking Stock (QQQ) - Daily Interval

Similar to the above chart of the S&P 100 (OEX.X), a "sliver of resistance" is in play in the QQQ and NDX near-term, just above WEEKLY R1 of $27.51, which was traded above, but not held at today's close. But this "sliver" comes from MONTHLY and WEEKLY pivot analysis retracement. The only level of resistance from conventional retracement is the December highs of QQQ= $28.79 and NDX= 1,155.68. Tentative near-term support (tentative as it was resistance today that was traded through to the upside) is the WEEKLY pivot of $27.19, with more formidable support at the WEEKLY S1 of $26.62 and overlapping of the WEEKLY 80.9% retracement. Keep this level in mind when considering current levels of bullish %.

Today's trade saw the NASDAQ-100 Bullish % ($BPNDX) see a net gain of 23 stocks to new point and figure buy signals. This has the bullish % "bull confirmed" (was "bull alert" after reversing up to 36% on Monday, March 21).

While the bullish % can grow to 100%, we are now nearing a more "overbought" 70% level of bullishness and bulls are advised to exhibit caution on new bullish positions.

While the bullish % are not very good at predicting price forecast, but are EXCELLENT in depicting market risk, I've tried to show relative high and low reading of the last bull to bear cycle. I would "eyeball" a level close to the WEEKLY R2 of 28.08 as being in between the two recent relative high bullish % readings of 76% and 66% (split the two for 71%) and this would be a level if achieved, a bull would be well advised to get from full positions to 50% position. If you're holding 1/2 bullish position, then par back to 1/4.

In December the NDX took a wild "plunge" lower from 76% (was risk too high, or was it "news" driven?) fell to 60% bullish, then had a little "pop" back to 66% bullish before eventually falling to a bear cycle low of 30%.

I see a pretty good tie in with this WEEK's WEEKLY S2 of $26.30, which I would deem to be reasonable BULLISH risk at this point. With this bullish % now near 70%, I wouldn't rule out a test of the December highs or even the MONTHLY R2 of $29.23, just understand that at those levels, this MARKET (NDX/QQQ) would most likely be EXTREMELY overbought and RISKY.

Pivot Analysis Matrix

In an attempt to get the Index Trader Wraps out on a more timely basis, detailed reviews of the pivot matrix will be limited. Weekly S1 and pivots are deemed support, while upper levels of resistance, while correlative begin to serve as trading exit points for bulls to then look for pullback entry levels. The Dow Industrials (INDU) MONTHLY R1 has yet to be traded and that level is withing 10-points of DAILY R1. As shown in the first chart of tonight's wrap, Dow has found sellers below the 8,550 level on recent rallies. A break of that level (8,550) should then give further upside potential to WEEKLY R2 and DAILY R2 near 8,620.

Jeff Bailey

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