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Surprising election results out of Spain, where a Socialist party victory in that country's general election on Sunday dealt a blow to President Bush's global support for the war on terrorism.

Spain's new prime-minister-elect pledged to bring the country's troops home from Iraq by June 30 and sent shockwaves through global markets.

The election results out of Spain were a surprise, where last week's terrorist bombings in Madrid are thought to have swayed voters toward the Socialist ticket.

"Clearly, the Socialist victory is not a plus for any exchange in Europe," said Lex Werkheim of brokerage Eureffect in Amsterdam. "The rough tone that the new prime minister is taking, in withdrawing troops, is creating more political instability in the European bloc."

The change in sentiment out of Spain left some political analysts here in the U.S. saying the political landscape in the U.S. becomes much more uncertain, with President Bush's tax cuts, which had helped boost consumer spending and economic growth, be at risk, should voter sentiment, which many see as 50/50 as it is, see a swing to Democratic challenger John Kerry.

In addition, there was mixed economic data to contend with as a better-than-expected reading on February's industrial production was set against disappointing data on manufacturing activity in the New York area over the past month.

Market Snapshot / Internals - 03/15/04 Close

The major indices started today's session in negative territory and while there was a slight lift just prior to 01:00 PM EST on un-sourced news that the Bank of Japan may quit their incessant intervention in the currency markets. However, another late session round of selling in equities had the major indices closing at their lows of the session. Friday's trade did see the NASDAQ's NH/NL 10-day average ratio reversing to "bear confirmed" status at 90.8%%, and deteriorating further to 89.4% in today's trade, which becomes a longer-term signal that bullish leadership in the NASDAQ continues to fade.

Pivot Matrix

The Federal Open Market Committee (FOMC) meets tomorrow and many expect the Fed to keep its target for fed funds at 1.0%, where anemic jobs growth remains one of the economic indicators for the Fed to not be tightening.

After rebounding back near, or above their MONTHLY S2s, all major market averages closed back below their MONTHLY S2s in today's trade, where some tentative resistance (dashed red) builds for the NDX/QQQ at MONTHLY S2 and DAILY Pivot, while correlative support levels for the DIA/SPX/OEX and BIX.X are present at newly calculated WEEKLY S1s.

Dow Industrials Components - Sorted by Price

Dow breadth was decidedly negative by the close, where 5-day percentage gain/loss shows indiscriminate selling the past 5- sessions. Over the past 20 sessions, bulls have had a 1-in-10 chance of finding profits, while double-digit percentage losses have been found in Boeing (NYSE:BA), Honeywell (NYSE:HON), Intel (NASDAQ:INTC) and Eastman Kodak (NYSE:EK).

After today's closing bell, 3M (NYSE:MMM) $74.87 -1.77, which saw intra-day trade at its rising 200-day SMA ($74.48) saw its shares rise to $76.94 in Instinet trade after saying it now sees Q1 (March) EPS of $0.86-$0.88, which is above the company's prior guidance of between $0.80-$0.82 and consensus estimates of $0.82, and fiscal 2004 (December) EPS of $3.52-$3.62 versus consensus estimates of $3.52.

Dow Industrials (INDU) Chart - Daily Intervals

Spain's election results and a weaker than forecasted New York Empire State Index for March found the INDU quickly below the 10,210 level. A stronger than forecasted February Industrial Production gain of 0.7% did see the INDU edge back near the 10,210 level, but that was it for any sign of strength.

Before the bell, February housing starts (forecast 1.94 million annual rate versus prior 1.903 million) and February building permits (forecast 1.90 million versus prior 1.920 million) are scheduled for release. Later in the day, the FOMC's brief statement is scheduled for release at 02:15 PM EST.

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

The SPX has traded down 5 of its last 6 sessions, and while I keep expecting a bounce, it has yet to form. In Friday morning's 09:00 AM EST update, I showed my MARCH e-mini S&P futures (es04h) chart with fitted retracement, and while the June contract is the current contract most futures traders are trading, that fitted retracement technique, along with the above chart of the cash market should show some correlative near-term support around the 1,095 area.

Financials have been weak in recent sessions, and I would currently have to tie the S&P Banks Index (BIX.X) 346.45 -1.19% WEEKLY S1 of 344.23 with the SPX's WEEKLY S1. Should the BIX.X break below its lower MONTHLY S2 of 343.29, then the SPX becomes further vulnerable to its WEEKLY S2 of 1,074.72.

NASDAQ-100 Tracking Stock (QQQ) - Daily Intervals

The Semiconductor Index (SOX.X) 471.74 -2.75% broke below last week's lows of 473.75, which were found on Thursday, and if there was any sign of "strength" in the QQQ, it was that today's low of $34.81, didn't break below Thursday's low of $34.81. I hesitated to trade the QQQ bearish, but with the SOX.X giving up Thursday's lows, I decided late today that it might be worth the bearish risk to short the QQQ back below its MONTHLY Pivot, but use a very tight stop at $35.10, just in case some type of bounce takes the QQQ back higher to its option expiration "Max Pain" level of $36.00.

Jeff Bailey

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