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Index Wrap

Nibbling, but little appetite

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A later session bout of selling found the major indices finishing mostly lower, as investors nibbled at stocks as if they were appetizers for the bulk of today's session, but seemed to have little appetite for a full helping.

This morning's trade started out with investment banker Goldman Sachs (NYSE:GS) $101.39 +0.08% delivering a blow out quarter and providing an upside catalyst, but if a lack of bullish follow through as seen in other names like Procter & Gamble (NYSE:PG) $103.36 -0.58% from a couple of weeks ago was sign that the markets lacked bullish leadership, or bulls were becoming more cautious, then today's modest gains from Goldman's trade, suggests buyers are lacking an appetite for equities.

Market Snapshot / Internals - 03/23/04 Close

There were reports after the bell that some larger institutions hit the major indices with computerized sell programs. At 02:35 PM EST, the NASDAQ-100 Tracker (QQQ) $34.03 -0.81% was trading in positive territory at $34.48, but dropped precipitously to its 04:15 PM EST close, as though bears wanted to make a statement of who's really in control. Market internals were vastly improved from Monday's session, but a healthier A/D line when compared to even the best levels of the session for the major indices hints that gains were fractional for most stocks, as if buyers were just doing some nibbling.

NYSE and NASDAQ NH/NL indications - 02/17/04 - 03/23/04

In last Tuesday's wrap (03/16/04), we looked at the NYSE and NASDAQ NH/NL indications, along with a point and figure chart of the NASDAQ Composite's NH/NL 10-day average readings, where both the NYSE and NASDAQ NH/NL 10-day averages had just reversed into a column of "O" as if bullish leadership was taking a rest.

Since then, a trader/investor hand charting the NASDAQ NH/NL 10- day average would have filled in "O" to 76%. Here's what my chart of the NYSE NH/NL 10-day average looks like, where yesterday I placed an "O" at 86%.

NYSE Composite 52-week High/Low - (10-day Avg) 03/23/04

Tonight's NYSE NH/NL update isn't about hand charting, but a visual representation of how the NASDAQ continues to pull the NYSE lower. In the above chart, unlike that shown last Tuesday, I placed a BLUE line at the 50% level. Think of this BLUE line as the divider between BULLISH and BEARISH leadership.

Sometimes what I mean to say, doesn't come out correctly on paper. There is still bullish leadership present in both the NASDAQ and NYSE, but that leadership is very narrow, and not broad like a bull would want to see for a healthier market environment.

NYSE Composite Chart ($NYA.X) - 50-point box

One can begin making some ties as to the NYSE NH/NL 10-day average, and softening of bullish leadership, with the NYSE Composite ($NYA.X) 6,418.32 +0.21% chart itself. We can see how the NYSE Composite ($NYA.X) continued to surge higher in October (RED A) as the NH/NL indications stayed pegged near 100%. While it is IMPOSSIBLE to tie actual PRICE with any bullish %, or NH/NL indications, I would have to assess downside in the NYSE Composite to at least 5,900 at this point.

Ideally, a bear would like to see a bounce in the NYSE Composite, or any major index at this point, in order to provide a better risk/reward trade, but RISK for a bear, while waiting for the bounce, that may not come, can be mitigated by cutting back their trade size.

The point and figure charts, which take out quite a bit of the noise of day-to-day trade show that there's still quite a bit of bullish risk that has yet to be removed from these markets, and perhaps why the indices are having trouble getting a bounce.

Pivot Matrix -

Today's high in the Semiconductor Index (SOX.X) 457.46 -0.31%, which did show some early session gains, came right at the SOX's MONTHLY S2.

Semiconductor Index (SOX.X) Chart - Daily Intervals

It has been awhile since we looked at the SOX.X with our retracement used from the head/shoulder top pattern, but Friday's break below 61.8% retracement and 469 has the 412 pattern objective looking more likely with each passing day. Early gains this morning could have easily been sold into by bulls that had been nibbling above the 469 level, where Monday's break below the 200-day SMA left a bad taste in their mouth.

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

This morning's high came in part to strong earnings out of Goldman Sachs (NYSE:GS) and early strength from financials. But if GS's trade was any indications that bulls are just nibbling, it is going to take more than nibbling to keep the OEX from trading 525 if it takes out Monday's lows to the downside. Today's high in the OEX certainly seemed to find willing sellers back at the WEEKLY S1.

NASDAQ-100 Tracking Stock (QQQ) - Daily Intervals

Both the OEX and QQQ sit right on their WEEKLY S2s, but recent observations have had even correlative, or overlapping pivot levels lacking much formidable buying. This afternoon's last hour of trade sure seemed like sellers were bound and determined to have the Q's close below their 200-day SMA.

Jeff Bailey

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