Option Investor
Index Wrap

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After posting gains last week, the major indices started this week off with fractional losses, with some traders certain today's choppy session was for the birds.

A case of Bird Flu was found in a flock of Delaware-raised chickens over the weekend, where 12,000 of the chickens were destroyed on Saturday in an attempt to prevent the spread of avian flu. While just two of the chickens were reported to have been tested positive for the virulent H7 virus, a strain of the virus that is different than that which has killed 18 people in Asia (H5N1), the flock of 12,000 was destroyed has the H7 virus is deadly for chickens, but does not transmit to humans.

Traders quipped that news of the H7 virus being found in a flock of Delaware-raised chickens may have been cause for today's choppy session where poultry gains and losses were found.

While Dow component Coca Cola (NYSE:KO) $52.40 +2.76 popped to a new 52-week high and lead gains among fellow components, negative breadth of 18 to 12 had the Dow Industrials (INDU) 10,579.03 finishing down 14 points, as a brief peek back above the 10,600 fizzled.

This weekend's G-7 meeting and December wholesale inventories, which rose 0.6% while sales gained 1.0% left little impression on traders, as volume levels at the NYSE and NASDAQ were their lightest since January 2, 2003.

With little economic data looming, trading could mimic Monday's for the rest of the week, though something could come out of the blue to move the markets, such as an unexpected comment from Alan Greenspan when the Federal Reserve chairman addresses Congress on the state of the economy Wednesday and Thursday.

Market Snapshot / Internals - 02/09/04 Close

Market breadth at the A/D line was positive throughout today's trade with the number of new highs at the NYSE and NASDAQ the best found since January 28th's respective 292 and 225.

At its best levels of the session, the NYSE Composite ($NYA.X) 6,641.81 +0.13% came within 18-points of its January 22nd 52-week high of 6,680.01, while the also broad NASDAQ Composite (COMPX) 2,060.57 remained well off its January 26th high of 2,153.83.

Pivot Analysis Matrix -

Both the S&P 100 Index (OEX.X) 563.72 -0.41% and S&P Banks Index (BIX.X) 350.96 -0.42% saw intra-day trade at their WEEKLY Pivot, where aside from the NDX/QQQ and SOX.X, this WEEK's pivots are nearly identical to last weeks, as S2s and R2s compress.

The Semiconductor Index (SOX.X) 514.16 -1.01%, which jumped 23 points on Friday, or 4.7% and erased earlier week losses, closed back under its rounding flat 50-day SMA of 515.06 today, with KLA-Tencor (NASDAQ:KLAC) $56.24 -2.19% and Broadcom (NASDAQ:BRCM) $38.81 -2.09% leading the sector's declines.

Japan's Nikkei-225 ($NIKK) - 50-point box

In Wednesday evening's Market Monitor I briefly posted some of the world's major equity indices' point and figure charts, where it was notable that Japan's Nikkei-225 ($NIKK) 10,425.77 was notably weaker than other major indices. It is often-times noted that technology stocks here in the U.S. as well as the Nikkei-225 will tend to trade similarly. I quickly calculated February MONTHLY Pivot levels for the $NIKK based on January's high/low/close and would have to deem the 10,300 level as a rather important near-term level of support, where 10,300 is correlative with the $NIKK's MONTHLY S2 as well as its current bearish vertical count of 10,300.

NASDAQ-100 Tracking Stock (QQQ) - Daily Intervals

While I wouldn't say the QQQ and the Nikkei-225 were necessarily joined at the hip and track each other exactly, the recent highs on the Nikkei-225 match dates for the QQQ. While the Nikkei-225 traded its lowest level this year and the Q's have just bounced from a 2004 low, I'm looking for the $NIKK to hold the 10,300 level, where I think the QQQ provides a good bullish trade setup should it dip back to $36.75, then see strength back above the $37.00 level and WEEKLY Pivot.

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

I see a rather formidable level of support developing at the 1,130.50 level where we find an overlapping MONTHLY Pivot and WEEKLY S1, where the upper-end of a broken-to-the-upside bullish resistance trend, which also served support on the recent pullback provides important near-term support.

With this observation in mind, I also want to take a quick look at the SPX on a 60-minute chart interval, where I've place conventional retracement on the SPX from its January 26th closing high to a 01/29/04 intra-day 60-minute close, where this retracement ties in with recent trade, but also suggests that 1,130.50 is an important level of near-term support.

S&P 500 Index (SPX.X) Chart - 60-minute intervals

The SPX on a 60-minute interval shows the SPX retraced 61.8% of its recent decline, where Friday's move above 1,130.38 found a strong move back higher. This 1,130.38 level on the above chart is very correlative with this week's WEEKLY S1 and MONTHLY Pivot, while the January 26, 2003 closing high is correlative with this week's WEEKLY R2. I would certainly have to think that a more fractional pullback to 1,136.19 and reversal back above today's high would see a test of of the 1,155.01, a bullish entry back near 1,130.50, with a stop just under the 01/29/04 low of 1,122.38 provides a good bullish trade setup.

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

The OEX closed just about in the middle of its recent two-week's trade, where I'm looking for support to be firming at the 560 level. A kick much above today's highs should set up a test of the OEX's recent highs.

Dow Industrials (INDU) Chart - Daily Intervals

While the INDU declined from the 10,700 to 10,440 in recent weeks, it has allowed bullish resistance, or the upper-end of the bullish regression channel to move higher. Support should be firm at the mid-point of this regression channel and WEEKLY S1 of 10,487.

Jeff Bailey

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