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Light volume ahead of Greenspan's testimony

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For the second-straight session, volume levels at both the New York Stock Exchange and NASDAQ came close to matching the lightest volumes of the year, which were found on January 2nd, when traders came stumbling back from New Year's celebrations.

But traders will be sober tomorrow and listening closely as Fed Chairman Alan Greenspan begins his semiannual testimony on the state of the economy to Congress tomorrow.

Most Washington watchers expect congressional leaders to probe Mr. Greenspan's brain not only on his views of the economy, with special focus on jobs growth, but the Treasury's view on the budget deficit and government spending, with job growth still showing very modest signs of recovery.

Yesterday's and even today's light volumes strongly suggest traders were unwilling to get in front of Mr. Greenspan's testimony, where alternating buy/sell programs in the second-half of today's session seemed centered around the NASDAQ-100 Index (NDX.X) 1,500.29 +0.62% and its 1,500 level.

Earlier today, in the 03:15 PM EST I made comment that a sell program premium alert may have been generated just after the NYSE Composite ($NYA.X) 6,677.04 +0.5% had traded a new 52-week high, but some observations made this evening after the close of trade has me thinking it was NASDAQ-100 1,500 and its MONTHLY Pivot of 1,503, which found some institutional focus, and may be an important level of near-term resistance, where traders like you and I might be able to use as a key level up to, during and after Mr. Greenspan's testimony, where trade either side of this level dictates broader-market trade.

Market Snapshot / Internals - 02/10/04 Close

The NYSE Composite ($NYA.X) is first to trade a new 52-week high after the recent pullback, but doing so intra-day by just more than 1 point would not be indicative of a full out bullish stampede. The smaller-cap Russell-2000 Index (RUT.X) 591.91 +1.25% posted today's largest percentage gain among the major indices, and was the only major indices to exceed its early afternoon highs and show bullish conviction to then close at its session highs.

I wanted to quickly show some of this year's volume levels and NH/NL indications, where some early sign of renewed bullish leadership begins to show up, as both the 5-day and 10-day NH/NL average ratio's start to show some stability.

Internals Since 01/02/04 - Volume and NYSE:NASDAQ NH/NL

We know that stocks don't just trade a new 52-week high day after day after day, and the pullbacks in the major indices into last week had a gravitation effect on the number of new highs. We can see some slight improvement, or abating of decline in the 5 and 10-day average ratios of the NYSE and NASDAQ NH/NL indicators, which hints that some of the recent rebound for the major indices has seen a greater number of new highs, and fewer new lows. This action may begin to hint that the recent pullback for the major indices was corrective in nature, and perhaps attributed to profit taking, where some of that profit taking has started to run its course.

In GREEN and RED boxes, I've highlighted the NH/NL columns of both the NYSE and NASDAQ, where the NYSE achieved a 52-week high on 01/22/04, it recent relative low on 01/29/04 and a new 52-week high today. The NASDAQ Composite achieved its most recent 52- week high on 01/26/04, while its recent relative low was found on 02/05/04, which was on Thursday.

Shoot... I'm just now seeing that the NASDAQ's 5-day NH/NL average ratio would have crossed back above its 10-day NH/NL average ratio, and I should have colored that 95.3% green to reflect a near-term bullish crossover.

Pivot Analysis Matrix -

In PINK, I've highlighted today's high's in the both the NASDAQ- 100 Index (NDX.X) and its Tracking Stock (AMEX:QQQ) $37.18 +0.16%, where I think this afternoon's buy program was centered on the NASDAQ-100, which gave lift to the NASDAQ-100, but an offsetting, and rather powerful looking sell program was later seen, which hit the NDX/QQQ back lower from these levels. Both very close to their MONTHLY Pivots.

This may be an important observation as the NDX/QQQ have been the recent lagging indices in our pivot matrix, and you know me, I like to monitor both ends of the snake/inchworm, where the NDX/QQQ currently represent the "tail."

While the NYSE Composite showed some sign of trying to lead with a new 52-week high in today's session, it may well be the NASDAQ- 100 that needs to pull free as a sign these markets can move past the recent highs.

NASDAQ-100 Index (NDX.X) Chart - Daily Intervals

Tomorrow will be the first opportunity that Mr. Greenspan might be expected to address any further Fed thought on interest rates or the economy since Friday's release of January nonfarm payrolls, which showed the economy generated 112,000 new jobs, which was below economists' forecast of 165,000. The NDX and other major indices rallied on Friday, even though the nonfarm payroll data was weaker than forecasted. Some traders thought the level of job production, while still rather anemic, might have been a positive, as it would keep the Fed on hold for any type of raising of interest rates. A good test into Greenspan's testimony would be for the NASDAQ-100 to hold above the 1,478 level.

NASDAQ-100 Index (NDX.X) Chart - 5-minute intervals

The MONTHLY Pivot of 1,503.69 is notable resistance, and while volume levels were very light today, I'm noting the levels of trade where today's afternoon buy, then sell program premium alerts were generated, where I think NDX 1,500 is the point of contention, and perhaps major disagreement between bulls and bears. My thought process at tonight's close is that bulls are probably very cautious below the 1,504 level until a break higher is found, and while not shown on the above chart, it was a break above the 1,480 level on Friday, when the NDX sprinted quickly to our current WEEKLY Pivot, to then finish Friday's session at the 1,500.00 level.

Dow Industrials (INDU) Chart - Daily Intervals

Certainly the INDU is encountering some overhead supply, but I get the feel that the INDU is "looking back" at the NDX/QQQ to see if it is following the leader.

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

The SPX is similar to the INDU in that it too looks to try and be leading for strength, but needs some "high octane" in its fuel, which can be provided from technology stocks, which largely comprise the NASDAQ-100 Index (NDX.X).

I've pointed to the SPX's WEEKLY Pivot of 1,136.66, which is a level where on a knee-jerk negative reaction, we might prepare for NDX weakness back to 1,480. If NDX is weaker, then need to monitor a stronger SPX for strength above its WEEKLY Pivot.

Jeff Bailey

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