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Index Wrap

Financials firmed, while Biotechs bid

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The major indices traded strong to start the week with gains, where if not for the tragic death of McDonald's (NYSE:MCD) $26.75 -2.58% CEO Jim Catalupo, the Dow Industrials (INDU) 10,437.85 -0.13%, which finished down a modest 14 points, would have most likely joined the major averages to finish in positive territory.

Financial sectors finished fractionally lower, with the Securities Broker Dealer Index (XBD.X) 136.68 -0.56% having split 5:1 from Friday's close, where the financials showed some hesitancy before Fed Chairman Alan Greenspan begins his scheduled testimony before the Senate Banking Committee tomorrow.

While financials try to firm above Thursday's intra-day lows, the Biotechnology Index (BTK.X) 550.43 +2.83% lead today's list of index gainers, while Biotech HOLDRs (AMEX:BBH) $148.82 +1.61% also found gains with dual component Affymetrix (NASDAQ:AFFX) $37.46 +6.99% surging to a new 2-year high ahead of Wednesday's after-the-bell quarterly earnings release.

While not a component of the BTK.X or BBH, ImClone Systems (NASDAQ:IMCL) $66.30 +11.86% jumped to levels not seen since the companies founder Sam Waksal illegally began selling shares.

Banc of America Securities initiated coverage on ImClone with a "buy" rating and bullish price target of $91, saying the company receives unprecedented economics on U.S. sales of its Erbitux partnership with Bristol Myers Squibb (NYSE:BMY) $24.53 -1.40% and believes that favorable economics and no cost of goods expense for the first $1 billion in Erbitux sales could drive longer-term earnings power to $3 per share.

Banc of America's comments helped fuel broader sector gains on thought that other biotech companies may be in a similar position in the future for favorable economics, should cash-rich drug companies look to bolster/develop their pipelines.

According to Banc of America, ImClone is set to receive a 39% royalty of net sales, and a 10% mark-up above drug manufacturing costs.

U.S. Market Watch - 04/19/04 Close

Positive comments out of Wachovia on wireless service providers Nextel (NASDAQ:NXTL) $25.00 +4.51% and Western Wireless (NASDAQ:WWCA) $22.71 +0.88% brought helped give some boost to the Combined Telecom Index (IXTCX) 188.06 +2.21% as it reclaimed its 50-day SMA (187.36) in today's session.

Handset maker Nokia (NYSE:NOK) $15.30 +4.72% reversed some of its recent declines that found the stock pummeled from $21 after disappointing guidance earlier this month, after brokers Prudential, UBS and JP Morgan downgraded the stock before today's session began.

Market Snapshot / Internals - 04/19/04 Close

By the close, the very broad NYSE Composite ($NYA.X) 6,620.05 +0.05% managed to close in positive territory, with A/D breadth even, while the also broad NASDAQ Composite ($COMPX) 2,020 +1.23% climbed back above the 2,000 level and its starting to round flat from recently lower trending 50-day SMA (2,014.74).

Pivot Analysis Matrix

As I look at tonight's Pivot Matrix, support may well be defined by both the S&P Depository Receipts (AMEX:SPY) $113.83 (unch) and the S&P 100 Index (OEX.X) 555.78 +0.15% at their correlative DAILY S2/MONTHLY Pivots, where the MONTHLY Pivots were not tested in today's trade, while both the narrower Semiconductor Index (SOX.X) 487.03 +1.43% and S&P Banks Index (BIX.X) 336.69 -0.24% find near-term correlative resistance at their respective MONTHLY Pivot and MONTHLY S1.

I would fully expect traders/investors to be listening VERY CLOSELY to Mr. Greenspan's testimony tomorrow, where the Senate Banking Committee question/answer session will undoubtedly have traders keying in on EVERY SINGLE WORD Mr. Greenspan speaks, in an attempt to get a feel for the Fed's view on future interest rates, where I'd be willing to bet my last dollar, somebody is going to ask what impact, if any, the jump in March nonfarm payrolls data has had on the Fed's view of current Fed funds rates.

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

As the Fed, lead by Alan Greenspan looks to engineer an economic recovery, it would be beyond my capability to say for certain what Mr. Greenspan may say tomorrow, but I think he sticks to past commentary that the Fed sees little urgency in raising rates, but the March nonfarm payroll data is the encouraging sign that the resurgent economic signals are finally showing some growth in the jobs market.

I would also think Mr. Greenspan discusses the still low rate of capacity utilization, where commodity prices showing some stability leaves the Fed patient.

Continuous CRB Index ($CRB) - Daily Intervals

Here's an updated (to April 13 Index Wrap) chart of the continuous CRB Index ($CRB) from www.stockcharts.com, where commodity prices to indeed seem to be showing some sign of impact from the recent rise in Treasury YIELDS (as depicted by the 10- year YIELD), where in essence, the bond market may have done some of the Fed's work near-term, allowing Mr. Greenspan and company to push out any type of rate hike into next year.

I am not certain, but the QCharts symbol for a similar CRB Index may be (CEC:cr00y) 277.85 +0.11%, where this QCharts chart looks very similar to the one above, where a trader could keep intra- day tabs on things. Again, I'm not so certain as to DIRECTION being a positive or negative for broader equities, but more importantly, the RATE of advance/decline.

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

Despite mixed sector trade, the SPX was able to hold above its flattening-out 50-day SMA and WEEKLY Pivot. A rather tight zone of support (1,125 MONTHLY Pivot) and resistance (1,143.51 MONTHLY 38.2) presents itself early this week. I do think a move above the WEEKLY R1 would bring in some upside momentum, and be enough to have MACD kicking higher without crossing below zero. While in a near-term downward trend (below 1,143.51) a break below 1,120 would most likely have MACD below its Signal (bearish) and have the SPX vulnerable back to its March lows.

Dow Industrials (INDU) Chart - Daily Intervals

I don't like to say "if only this wouldn't have happened, things would have been different," but there is no way the MARKET could have factored in the tragic death of McDonald's (NYSE:MCD) $26.75 -2.58% CEO Jim Catalupo, where after coming out of retirement, Mr. Catalupo has been seen as one of the key factors for MCD's turnaround. I think this was a shocker and brought some near- term uncertainty to the stock, but from what I've read, Mr. Catalupo's replacement is highly thought of.

I view important near-term support above 10,290 and resistance below 10,570.

NASDAQ-100 Tracker (QQQ) Chart - Daily Intervals

An intra-day chart of the QQQ would have the high being $36.59. During and after Mr. Greenspan's testimony, should the QQQ stay above $36.42, I'd have to view that a bullish signal from the market, where I would have to begin thinking a rally could take hold back to the MONTHLY R1. Keep an eye on the SOX.X should it show strength above 487 and MONTHLY Pivot, where from that point, I've got to be thinking the psychological 500.00 level is once again a gravitation point, which then lends itself to QQQ $37.74.

Jeff Bailey

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