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Perplexities of biblical proportions

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That's it! With a rise in consumer prices for the month of March, where prices rose a stronger than expected 0.5%, signs of inflation at the consumer level brought further selling into Treasuries (that makes sense), while gold and other precious metals thought to be a hedge again inflation saw selling (that doesn't make sense), while the major indices finished their session mixed (can't decide if its bullish or bearish).

OK... not EVERYTHING is supposed to make sense, and there was some trade found which traders can reason. Banks were under further selling pressure as Treasury yields were on the rise with the benchmark 10-year yield finishing up 4.2 basis point at 4.382%, but stocks may have found some solace that Treasury yields did back off from their early morning highs, as if most of the near-term damage has been done, a big move has been seen.

I'm not saying the selling in Treasuries is over, but after a higher jolt in yields just after the CPI data was released, yields edged back as the session wore on, which may have brought some calm to broader equities.

U.S. Market Watch - 04/14/04 Close

Some notes from today's trade had the Semiconductor Index (SOX.X) 503.12 -0.61% seeing trade at its WEEKLY S1 of 501.84 and the psychologically important 500 level, and all be darned if bulls didn't defend that level by the close.

Banks provided the "wet blanket" trade on both the SPX and OEX. I will have to say, if it weren't for some of the weakness found in the banks and brokers, both the SPX/OEX would have shown a very respectable trade today.

Disk Drives (DDX.X) took today's top spot among sector winners, but may see a weak trade tomorrow after component SanDisk (NASDAQ:SNDK) $32.51 +3.10 (also a component of the Semiconductor HOLDRs (SMH)) traded down 15% in after-hours trade when reporting quarterly earnings, but said it was cutting prices 20% on some of its flash memory products.

Heck. Here's some of this evening's after the close earnings announcements and brief comments Jim Brown made.

Market Monitor - After the bell earnings

The biggest after-hours movers was SanDisk (SNDK) and Apple Computer (NASDAQ:AAPL) $26.64 -1.07%, which has jumped to $29.16 in after-hours trade. Advanced Micro Devices (AMD) $17.12 -0.23% traded higher at $17.54, while Texas Instruments (TXN) $28.68 -1.03% is seeing higher trade at $29.05.

Market Snapshot / Internals - 04/14/04 Close

Price action by the close was stronger in my opinion than the internals would have had me believing was possible. I want to quickly discuss the NYSE NH/NL indications, but show you what I've been mentioning in recent sessions.

NYSE New Lows for 04/14/04 (Partial List) -

I wanted to address the growing number of new 52-week lows at the NYSE, where using my QCharts "hot list" of new lows for the NYSE and loading them into a portfolio quote list, I've shorted the list by "Market Cap" (far right column of table), where my real focus for the Index Wrap is the Industry Name. Once we get past the first nine names, we'll not that the bulk of those listed below have a "bond" or fixed income type of name association.

Some additional notes I would make is that Family Dollar (NYSE:FDO) $31.80 -1.21% is a well known, or recognizable name, and its current market capitalization of $5.4 billion, while sizeable, would have this stock, if an S&P 100 component, being ranked #91 among market cap size, if it were a component of the S&P 100 Index (OEX.X) 551.88.

What I'm getting at right now is that while the growing number of new lows at the NYSE, which now handily outnumbers new highs, and would normally suggest BEARISH leadership, I do think traders and investors well served to "discount" the NYSE NH/NL indications a bit as it would relate to a true leadership breadth indicator, with the understanding that the bulk of new lows are most likely coming from bond-related securities. However, it would be this observation (bond-related securities) and weakness that most likely suggests a market counting on Fed rate hikes.

In PINK, I've boxed a new security, which just started trading on the New York Stock Exchange calls the NYSE-100 Index iShares (NYSE:NY) $61.06 -0.22%, which is a basket of larger NYSE-listed stocks, which the NYSE hopes will eventually rival the NASDAQ-100 Tracking Stock (AMEX:QQQ) $36.81 +0.49%. I would expect volume to be light in the NYSE-100 iShares as it has only been trading for eight sessions now. Once it gets some trade history under its belt (a couple of months), I would think volume begins to pick up, where traders can begin using some charts.

Weekly Mortgage Bankers Association figures -

I wanted to show my spreadsheet I keep of the weekly Mortgage Bankers Association data, and figures they report. I tend to associate Purchase Index with "home buying," Refinance Index with "business at the banks, loan originators." In PINK I've marked current 30-year fixed rate mortgages (as of 04/09/04) as a benchmarking point.

What stands out to me is how strong the Refinance Index numbers were compared to early/mid-December. What always amazes me is how the stock market had the BIX.X trading a high of 362 on March 5, and now trading 333.

Pivot Analysis Matrix -

I say the BIX.X or banks and brokers have provided a "wet blanket" for the SPX/OEX and with the BIX.X falling and closing below its WEEKLY S2 and MONTHLY S1, I'm looking at tomorrow's DAILY R2 being correlative with WEEKLY S2 as a level where a near-term relief bounce could take place.

Remember Commercial Federal (CFB) $24.92 -0.91%, which warned on earnings a couple of days ago at the $27 level? This regional banker traded a session low of $24.22 today, but closed right back near its highs as of some bearish profit taking was found on the weakness (could be bottom feeder bulls). I'll check in on CFB as it was dismantled on lowered guidance due to slowing in its mortgage lending business.

The one thing a trader might keep an eye on tomorrow is the 10- year YIELD, where some settling back in YIELD from a morning high of 4.469% could bring in some relief to the banks should the 10- year YIELD ($TNX.X) slip back below correlative DAILY S1 and MONTHLY R2. I mention this as the MARKET has been jittery with rising YIELD, and a move back under might give some near-term relief to the recent rise.

With upbeat AAPL and AMD after-hours trade, near-term resistance correlations for the QQQ (tough little bugger of late) resides at DAILY R1 and WEEKLY Pivot. QQQ last ticked $36.86 in extended hours, after trading as high as $36.93 in after-hours trade.

Dow Industrials (INDU) Chart - Daily Intervals

The INDU managed to claw its way back above correlative MONTHLY Pivot and WEEKLY S1 prior to the close after finding buyers at its rising 21-day SMA. Further weakness below WEEKLY S2 of 10,292 most likely has MACD oscillator back below zero and gives greater significance to current downward trend at the 10,500 level.

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

I've tried to eyeball the DAILY S2 to DAILY R2 range within the confines of current trade, where continued weakness in the financials would bring a break of WEEKLY S2, where today's trade saw the BIX.X seek out its DAILY S2 (for Wednesday) like a heat seeking missile. A relief bounce in the financial with some still underpinning strength from technology has WEEKLY Pivot and 50-day as well as DAILY R2 right back in play.

NASDAQ-100 Tracking Stock (QQQ) - Daily Intervals

The main note I would have to make with the QQQ today is that despite weakness below yesterday's low, there was EVERY OPPORTUNITY for bulls to at least concede the backfilling of the nonfarm payroll gap higher. What this suggests to me is that there may well be some overly short bears below the $36.19 level in front of the nonfarm payroll numbers that are still trying to get squared up. The reason I discuss bears covering is that I would think a BULL would have been sitting lower at $36.19, waiting for the backfill of the gap when weakness was being found. Especially has the SOX.X was teetering at 500.00.

Jeff Bailey

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