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Index Wrap

Semiconductors weigh on tech, oil approaches $39

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The Semiconductor Index (SOX.X) 453.44 -3.37% finished the session down 15.85 points, led lower by Xilinx (XLNX, -6.7%), ALTR (-5.4%), National Semiconductor (NSM -5.4%) and Novellus Systems (NVLS -4.7%) as weakness associated with JBL's guidance forced speculation that overall demand for semiconductors is waning.

Weakness among semiconductors weighed heavily on broader technology and many 4-lettered stock symbols with the very broad NASDAQ Composite (COMPX) 1,983.67 -0.72% and its sibling NASDAQ- 100 Index (NDX.X) 1,464.03 -1.07% showing relative session weakness against other major indices.

Despite recent weekly data that showed builds in U.S. oil inventories, continued attacks on Iraqi oil pipelines had August Crude Oil futures (cl04q) jumping $1.16, or 3.08% to settle at $38.81.

U.S. Market Watch - 06/17/04 Close

While many 4-lettered stocks found a lower trade in today's session, those with 1, 2 and 3-lettered stock symbols at either the New York or American Stock Exchange faired better in what could be called an "oil and water" trade. While the NASDAQ Composite struggles with downward trend, the NYSE Composite found early morning support at its recently broken-to-the-upside downward trend to post a 10-points gain.

Market Snapshot / Internals - 06/17/04 Close

While the NASDAQ's NH/NL 10-day Average Ratio slips lower by an additional 2.2%, we get the feeling that that slippage has a pulling effect on the NYSE NH/NL 10-day Average Ratio, where it would currently take a reading of 74.0% for it to see a 3-box reversal on its point and figure bullish % Chart. I'll try and tie this bullish leadership indicator in with a bar chart of the NYSE Composite ($NYA.X) in a moment.

Sectors with good representation on the new high list today include Oil & Gas (BR, BRY, CECX, CHK, COP, CRZO, DVN, GRP, JDO, VPI, WGR, XOM), Steel (LSS, NSS, NUE, OS) and Food/Beverage (CSG, WFMI, UNFI).

NYSE Composite Chart - Daily Intervals

In last night's Index Wrap we looked at the NASDAQ Composite (COMPX) and I'm showing the NYSE Composite ($NYA.X) with similar use of retracement and trend. While the COMPX struggles with what would be the solid red trend on the above chart, the NYSE is trying to hold this trend as support.

Now, as you and I follow the NH/NL ratios over time, we can see that the NYSE holds greater bullish leadership, but lets not also forget how much more "oversold" it was at 12% at its recent low readings. As we see the NASDAQ Composite struggle with downward its solid red downward trend, I've added the dashed red trend on the NYSE Composite chart, where perhaps we begin to make the tie with the recent NYSE NH/NL 10-day Average Ratio high reading of 80% with this dashed red downward trend.

Now, I'm limited by time to how many charts I can get doctored up, but one reason I think it important, or worthy of a review on both the NASDAQ Composite (COMPX) in last night's wrap, and now the NYSE Composite (NYA.X) in tonight's wrap is because of this week's Triple With expiration.

Understand that it may be easier to "push around" the NDX/QQQ, the S&P 100 (OEX.X), the INDU (30 stocks) and perhaps the S&P 500 Index (SPX.X) in order to get things squared up at an options/futures expiration.

It's entirely different, and perhaps a more natural trade to observe/understand both the NASDAQ COMP (3000+ stocks) and NYSE Composite (3000+ stocks).

If I were to combine the two, I'd certainly have two indices right at downward trends, some abatement of bullish leadership, and a more defensive picture at this point.

Pivot Matrix -

Good gravy! I'd go cross-eyed looking at all of these correlations for tomorrow's trade. Why do YOU think we'd see so many correlations? My best guess..... computers are doing a HECK OF A LOT OF THE WORK as they try and get things squared up at the quarterly Triple Witch.

The point I would have to make at this point is that unless you're going to trade VERY TIGHT STOPS intra-day, with hopes of getting some type of quick move intra-day, I'd be more tempted to just sit on the sidelines with any type of trade entry at this point.

Semiconductor Index (SOX.X) - Daily Intervals

The bulk of today's declines for the SOX.X came in the first hour of trade, where today's close comes below the SOX's long-term upward trend from the October 2002 lows. A recent MACD sell signal, that is now present today led to a lower low. A quick check of Dorsey/Wright and Associates' Semiconductor Bullish % (BPSEM) shows a net loss of 1.47% of semiconductor-related stocks to reversing lower point and figure sell signals to 23.53% bullish. While still "bull alert" status having reversed up from 18% to a recent high reading of 26%, a break much below our MONTHLY Pivot would have 435 back in play, if not a good washing out in the weeks to come to the 412 area.

Jeff Bailey

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