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Index Wrap

A week of rest

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Some mixed reactions to the first spat of quarterly earnings, some resurgence of resistance toward the coalition forces in Iraq, and some cautionary trade into the three-day weekend found the major indices finishing fractionally lower this week, and seeing a mixed to fractionally lower trade on Thursday.

Market Snapshot / Internals - 04/08/04 Close

The major indices jumped at the open, but then trended lower for the rest of the day on relatively light volume, as traders seemed a little more focused on protecting some gains into an extended weekend.

Pivot Analysis Matrix

Thursday's high and low for both the DIA and SPY was this week's range for both of these trackers, so you're not seeing double when looking at the DAILY/WEEKLY matrix levels for Monday. Tentative resistance correlation are found in the NDX/QQQ and SOX.X at the WEEKLY/DAILY Pivot, where more meaningful resistance would be higher at the MONTHLY R1s, where both the NDX/QQQ opened for trade Thursday's morning.

Internet HOLDRs (AMEX:HHH) - Weekly Intervals

Last weekend, it may have been economists' putting in some extra hours at the office and fine tuning their models to compensate for more robust job additions. This weekend it may be Internet analysts rerunning some numbers after Yahoo! Inc. (NASDAQ:YHOO) $56.21 +16.25% blew past analysts' estimates. The news sent the Internet HOLDRs (AMEX:HHH) $55.77 +5.74% surging to a 3-year high.

The Internet Infrastructure HOLDRs (AMEX:IIH) $4.18 +2.70% was the second-biggest percentage gainer among the ETFs (Exchange Traded Funds).

Starting next week, the Dow Industrials (INDU) 10,442.03 -0.36% will begin trading with its three new additions.

Dow Industrials (INDU) - Components starting next week

This is how the "new" price weighted Dow Industrials will look starting next week.

In he age of wireless communications, Verizon (NYSE:VZ) $37.31 gets the nod over AT&T (NYSE:T), which sold its wireless division, while American International Group (NYSE:AIG) $76.27 is a refreshing addition, representing the insurance segment of the U.S. economy. With an aging population, Pfizer (NYSE:PFE) $35.60 complements Merck (NYSE:MRK) $44.63. With two drug components in the Dow Industrials, this year's presidential election results could loom large for both components, where healthcare and drug costs are a focal point. Eastman Kodak (NYSE:EK) $25.44 is transitioning toward digital products, some say a little too late, where the digital age may have simply been a determiner for International Paper (NYSE:IP) $42.01 -0.91% being removed.

Personally, I'll miss T, EK and IP, but as the saying goes...."times keep'a chang'n."

Dow Industrials (INDU) Chart - Daily Intervals

It was a marginally lower trade for the major indices this week, where Thursday's trade finds a close below last Friday's nonfarm payroll close. I thought today's question and answer coverage of the White House's National Security Adviser Condoleezza Rice by the Nine-Eleven commission helped cast a cloud over much of today's upbeat market news, where focus of what the current administration knew, or didn't know, and what the administration "should have done" prior to 09/11, was a bit unnerving ahead of the 3-day weekend.

A jump in crude oil prices on increasing upheaval in Iraq may have also dampened bullish enthusiasm in Thursday's trade, where a trade at $36.25 on this contract has the $0.25 box size point and figure chart generating a double-top buy signal, negating the prior bearish vertical count of $31.75, and now hinting at a bullish price objective of $44.25.

June Light, Sweet Crude Oil futures (cl04m) - Daily Intervals

I should have changed my time intervals to 720 instead of Daily, as today's trade for June crude saw a session trade from $35.59 to $36.65 (not $34.23-$36.65 as displayed in data box), but the last two sessions has seen a sharp rebound in oil prices, where the escalation of war in Iraq has been building again.

AMEX Gold Bugs Index ($HUI.X) - Daily Intervals

I keep waiting for gold stocks to show some life above the 243 level, and one would think that with some of the geopolitical events taking place, and higher oil prices being somewhat inflationary, this group would catch a bullish bid. I'm not sure but what higher energy prices may be negatively impacting some of the gold miners, where a recent contract high in June gold finds the $HUI.X well off its highs.

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

There may well have been some decisions made prior to today's open to continue to take some profits into the 3-day weekend, which of late, traders have been a little cautious on thoughts of potential terrorist strikes. The selling was very calm and methodical, and didn't depict a "that was the good news, now let'em have it."

That darned 1,125 level shows up again, this time as WEEKLY S2, which is correlative with the MONTHLY Pivot, and with a rather narrow range of trade having been found this week, I would think the WEEKLY S2-R2 range could be traded.

I placed a downward trend on the SPX, mainly because the SPX has closed back below last Friday's close where the nonfarm payrolls offered a bullish surprise, where follow through bullishness on Monday now marks a relative high. Technology stocks have comprised the bulk of the gains for the SPX, as financials, especially the banks trade just off their March lows.

S&P Banks Index (BIX.X) - Daily Intervals

I wanted to quickly review a chart of the S&P Bank Index (BIX.X), where tonight I'm making note that the BIX.X is sitting right near the base-end of rising regression from its March 2003 lows, where at this point, I'd have to say the "jury is still out" as to what impact Friday's nonfarm payroll data, along with the jump in Treasury YIELDS are having on this group.

In Thursday morning's 09:00 AM EST Update, I noted that Commercial Federal (NYSE:CFB) $26.92 -3.47% warned on quarterly earnings, saying its mortgage lending business had slowed. With regional banks comprising the SPX/OEX, I would view a break much below WEEKLY S2 a potential negative, or at least a heavier weight for the SPX/OEX.

Still, traders and investors noted that insurer Allstate (NYSE:ALL) $47.85 +4.36%, which surged to a 5-year high today, was a stock we touched on in Monday's Index Trader Wrap, when we quickly reviewed some of the OEX components.

While the bankers/insurance trade could end up being a wash, where insurance stocks take up slack for the banks, we'll want to still keep a watch on Treasury YIELDS (10-year in our pivot matrix), which edged up fractionally from last Friday's close.

Tonight I want to make the observation of trend in the above BIX.X chart, but also that downward trend in the 10-year YIELD ($TNX.X).

10-year YIELD ($TNX.X) Chart - Daily Intervals

Broader equities have not responded negatively to the recent rise in Treasury YIELDs ($TNX.X), and I would still think gradual rise is acceptable near-term as the economy's growth can offset higher consumer borrowing rates. What would trigger a negative reaction toward stocks is a sharp unwinding in the bond market, where YIELDS rise quickly.

NASDAQ-100 Tracker (QQQ) - Daily Intervals

With the Internet HOLDRs breaking out to knew highs on Yahoo's! (YHOO) earnings, I was a bit surprised the QQQ didn't make more of a "euphoric" move, or trade above Monday's highs. I still think there's a better than 60/40 chance that the QQQ might see a backfill of its nonfarm payroll gap higher, which would find WEEKLY S2 in play.

Many analysts had little negative to say regarding Dell Computer's (NASDAQ:DELL) $35.63 +2.32% upbeat guidance, where for the first time in a long time, Dell sounded more upbeat in regards to corporate IT spending really starting to show more sustainable growth.

If simply eyeballing a bar chart of DELL relative to the QQQ, DELL is approaching its January relative highs of $36 (QQQ equivalent $37.87) and DELL's recent 52-week high was found at $37, right where the QQQ spiked to its 52-week high and QQQ MONTHLY R2.

Jeff Bailey

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