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Index Wrap

The inchworm slipeth lower

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While the notably weak Semiconductor Index (SOX.X) 486.37 +0.23% managed to eek out a fractional gain by the close, and the also weak NASDAQ-100 Index (NDX.X) 1,437.47 -0.25% managed to finish today's trade with a more fractional 3.65-point loss, the recent weakness among technology sectors and new lows for 2004 has started to have a negative impact on the stronger indices, and has the appearance that the inchworm moving lower, as weakness finds recent strength looking back lower to see just what is tugging at the tail.

Market Snapshot / Internals - 03/09/04 Close

The NASDAQ-100 Tracker (AMEX:QQQ) $35.66 -0.25% finished lower by 11 cents after following the Semiconductor Index (SOX.X) 486.37 +0.27% back higher just before the close, where aside from the AMEX Gold Bugs Index ($HUI.X) 229.31 +0.13%, all equity-based sectors in my U.S. Market Watch finished lower on the session.

Today's NASDAQ Composite (COMPX) close of 1,995.16 is the lowest close of the year (2004) and lowest close since December 1, 2003, where today's trade was not only technically damaging, but may also become psychologically damaging to NASDAQ bulls.

NYSE and NASDAQ NH/NL Indications - 02/02/04-03/09/04 Close

Seven sessions ago it looked as if history dating back to mid- August looked to be repeating itself with a NASDAQ bounce taking place from the February 24th low, but the last 6 sessions has shown notable divergence from the mid-August time period I/we had been testing against. At least for the NASDAQ.

I've now marked today's NASDAQ Composite low and the recent February 24th low, where we see both the NYSE and NASDAQ NH/NL 5- day averages threatening to cross below their NH/NL 10-day average ratios, which suggests short-term bullish leadership is weakening once again. Both the NYSE and NASDAQ 10-day NH/NL average ratios continue to trend higher recent week's NH/NL data, especially that from March 1 give a lingering touch of intermediate-term bullish leadership, which can keep even the most bearish of bears from shorting stocks at or near their 52- week highs focusing on weaker stocks, where some overhead supply can help keep a bullish rally in check.

This 5-day NH/NL threatening to fall back below the rising 10-day NH/NL ratios becomes concerning to bulls, where great focus is placed on today's price lows, especially in the NASDAQ, where if broken to the downside, could bring on formidable selling should bulls begin stepping up their selling, where for a second- straight session, volume was brisk at the NASDAQ with just over 2 billion shares traded.

Pivot Analysis Matrix -

I've marked today's low in the Dow Industrials (INDU), which was 10-points below its WEEKLY S2, where on a WEEKLY basis, has often been a level where we have been alert to support buying in any of the indices. Today's low in the INDU also came very close to the correlative MONTHLY S1 of 10,427.85.

While not marked, the NASDAQ-100 Index (NDX.X), which has been the weakest equity index in our matrix for several weeks, continues to exhibit weakness in the matrix with a greater violation of its WEEKLY S2 and correlative MONTHLY S1. Both the NDX.X and SOX.X recovered from their session lows to close back near their WEEKLY S2s. In my opinion, this is a greater sign of some short covering and profit taking from bears, than bullish buying.

If there has been any question as to what the S&P Banks Index (BIX.X) 356.94 -0.69% (if not financials in general) has meant to the SPX/OEX to offset technology weakness, then today's low of 356.25, and close comes below the MONTHLY R1, not the MONTHLY Pivot or MONTHLY S1.

Right now, it would have to be my opinion that while the financials have softened the past couple of sessions, perhaps not that different than the NYSE Composite ($NYA.X) and Russell 2000 Index ($RUT.X) relative to the NASDAQ indices, the BIX.X is being pulled lower by current negativity toward tech and many 4- lettered stocks among the NASDAQ.

While Treasuries as depicted by the 10-year YIELD ($TNX.X) falling since Friday's nonfarm payroll data does suggest a defensive posture from the bond market, that defensive posture hasn't been as prevalent toward the banks, which would also become vulnerable under a weakening economic scenario. I will continue to monitor this line of thinking as the BIX.X did set an all-time high on Friday, which is similar to the SPX.X having set a new 52-week high that same day.

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

Today's trade saw the OEX break back below its WEEKLY S1 and rising trend, which was anchored at the 01/13/04 low of 552.62. This follows a similar trend and WEEKLY S1 break as witnessed in the QQQ yesterday, and has the look that the inchworm's tail (NDX/QQQ) slippage, is starting to take its toll on the OEX, if not the other major indices.

NASDAQ-100 Tracking Stock (AMEX:QQQ) - Daily Intervals

BIG volume again today in the QQQ on a downward move. I'll make note of this and should light volume rally take the QQQ back toward $36.67, would be looking for a short entry there after some bearish success in the Semiconductor HOLDRs (AMEX:SMH) $39.84 +0.68% from last week's entry of $41.00 and achieved downside target of $39.25 this morning.

While the NASDAQ NH/NL internals show lingering bullish leadership, the NASDAQ-100 Bullish % ($BPNDX) lost another 5 stocks today (Tuesday) to reversing lower point and figure sell signals, with the bullish % for this market now at 51%, where supply is really starting to outstrip demand.

Dow Industrials (INDU) Chart - Daily Intervals

The middle and lower price-weighted components of the Dow Industrials were notably weaker than the higher price-weighted components in today's session, and not unlike the SOX.X, which has been a weaker sector, and NASDAQ-100, which has been a weaker index, shows slippage at the tail.

The highest price-weighted component, Procter & Gamble (NYSE:PG) $102.49 +0.01% jumped to what would be a new high in after-hours at $104.70 after it warned that Q3 and fiscal 2004 (June) EPS should exceed consensus by $0.01-$0.02, citing continued strong organic volume growth. PG also announced a 2-for-1 split, and raised its annual dividend to $2.00/share (pre-split) from $1.82.

Jeff Bailey

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