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Index Wrap

Bulls defended where they had to....

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If I were to sum up today's session, it would be that bulls defended some rather important near-term levels of support, not only in the pivot matrix, but other areas as well.

The stage was set for some towel throwing early as the Dow Industrials (INDU) 10,395 +0.22% was faltering below its WEEKLY S1 (10,336), the S&P 500 Index (SPX.X) 1,134.41 +0.36% at its WEEKLY S1 (1,125.09), the S&P 100 Index (OEX.X) 553.47 +0.20% below its WEEKLY S1 (549.92).

And while the NASDAQ-100 Tracker (AMEX:QQQ) $36.65 +1.38% was sinking a penny below its WEEKLY S1 ($36.03) and undercutting yesterday's lows, it was the Semiconductor Index (SOX.X) 466.42 +3.47% that seemed to return a bullish favor that the QQQ had been providing the last three sessions, where the SOX.X had been struggling to hold near its longer-term upward trend.

U.S. Market Watch - 06/22/04 Close

In last night's Index Trader Wrap we reviewed charts of both the Semiconductor Index (SOX.X) where today's slight gap higher at the open to 452.02, never did find a re-test of its MONTHLY Pivot. There was a time at mid-session where despite the SOX.X trying to lead higher, the major indices seemed relatively clueless that the weaker SOX.X was actually showing some muster. Eventually, somebody got a sniff of the smelling salts and the major indices snapped back from their lows to post gains by the close.

No doubt the early weakness in Goldman Sachs (NYSE:GS) $90.60 +2.03% and Morgan Stanley (NYSE:MWD) $52.15 +1.75% had the look of "who cares, they're headed lower" as the Securities Broker/Dealer Index (XBD.X) 124.60 +1.40% looked to falter in the early going.

And while the XBD.X gains relatively marginal in today's session, I do think it helped return a bid to the financials, with the S&P Banks Index (BIX.X) 348.95 +0.17% holding a close above its WEEKLY Pivot. (Will show a BIX.X chart later in wrap)

And while we look at charts with their WEEKLY/MONTHLY pivots, we've also looked at some with conventional retracement and trend. It is tonight that I see the very broad NYSE Composite's ($NYA.X) 6,553.81 +0.13% session low came not only at a previously broken downward trend, but the 50% retracement, which marks the midpoint of the March to May declines. See Thursday evening's Index Trader Wrap at this link.

Market Snapshot / Internals - 06/22/04 Close

I've made a slight modification to the market snapshot at the NH/NL indications, where each night (not during the day) I will post both the 5-day NH/NL ratio as well as the daily percentage change, as well as the 10-day NH/NL ratio and daily percentage change.

I think we can see how the NYSE saw more of a "buy on close" trade imbalance as a sudden expansion of NH vs. NL was found in the final hour of trade. However, when reviewing the NYSE Composite chart shown in Thursday's Index Trader Wrap, try to envision the possible implication of the NH/NL indications at our "cheater's trend" and 61.8% retracement of 6,574.

Hmmmm.... I'm just thinking about this as I type, but did you notice in today's 01:00 PM intra-day update, when I quickly listed the SOX.X components that were leading the SOX.X gains, that all those mentioned (5) had 3-letters in their stock symbols and are stocks listed on the NYSE?

Perhaps the SOX.X isn't just important to the NASDAQ.

As I continue to monitor the NH/NL indications, it still appears there's a bit of an oil and water trade going on between the NYSE and NASDAQ (mix oil and water together, and oil rises) where the NYSE looks to be the oil at this point.

We have noted "lags" where these shorter-term (5-day) and intermediate-term (10-day) NH/NL indications will lag price movement, but as the NYSE Composite (NYA.X) looks to be trying to find some potentially pivotal (a 50% retracement) support, the question remains.... "Will the NASDAQ end up pulling the NYSE lower, or will the NYSE take control and lead the way higher?"

NYSE Composite ($NYA.X) Chart - Daily Intervals

There are 3-points of support present in the NYSE Composite ($NYA.X) chart as I have it drawn up (same chart as last Thursday). The 21-day SMA, the 50% retracement, and that solid red downward trend. Bulls defended where they had to.

Pivot Matrix -

A quick review of the Pivot Matrix would show that the QQQ was perhaps the "index" that pegged a support level and WEEKLY S1 in today's trade. The NDX.X didn't quite see a trade at my calculated WEEKLY S1, but was within fractions. Suddenly, the SOX.X shows a little strength in the WEEKLY Matrix as it doesn't see a leading lower trade (for a change) in the WEEKLY pivot matrix, where it becomes more obvious now, that MONTHLY S1 is the KEY level of support for the SOX.X.

My thoughts on the Broker/Dealer Index (XBD.X) is this, and I have to pose a couple of questions to myself.

If I were short a bunch of brokers, I would have been hopeful in the early morning trade, but when the "flush" move lower didn't come, I'd have to say that I would have turned to lock in gains on some bearish positions (hindsight being 20/20, but a review of what may have happened today).

If the declines aren't over for the brokers, then the S&P Banks Index (BIX.X) 348.95 +0.17% will be utilized by traders as a potential "differentiator" between a brokerage "dead cat bounce," or a bottom found, that now has legs.

Note the BIX.X has NOT seen trade at MONTHLY Pivot, or its WEEKLY S1. No other equity-based index in our matrix can make such a claim!

NASDAQ-100 Tracker (QQQ) Chart - Daily Intervals

On a daily interval bar chart, the QQQ would be a "so what" type of trade today, but I do think a "failure" move would be seen on a break back below the DAILY Pivot and correlative MONTHLY Pivot.

One reason for this is that the NASDAQ NH/NL indications still lack any sign of bullish leadership. A second reason is something I touched on in last night's Index Trader Wrap, and then discussed in today's 11:00 AM EDT wrap. Not that we see some pickup in volume today for the QQQ. For every buyer there's a seller, and the opposite is true.

Here's that QQQ chart with the volume at price study I showed this morning, where I would have to think a "failure move" would be best defined back below the DAILY Pivot.

A pickup in QQQ volume may have certainly been bullish buying as the SOX.X didn't break below MONTHLY S1, but bulls may have defended when they had too, as the QQQ looked set to enter that volume void.

NASDAQ-100 Tracker (QQQ) Volume at Price Chart - 120-min Int.

Here's an updated volume at price chart (volume at price is on the left of the chart, where black bars reflect concentration of volume). In the 11:00 Update, I had captured that screen just prior to the QQQ trading its session low. Again, bulls defended where they had to, just as the QQQ looked to enter a volume void, where the QQQ could have easily faltered and picked up steam to the downside. The QQQ didn't, and the SOX.X action had to have kept buyers interested.

Dow Industrials (INDU) Chart - 30-minute chart

Other than strength among the SOX.X in today's session, it is this intra-day look at the INDU, where I think bulls stepped up to the place, and snatch victory from the jaws of potential defeat.

Why? The INDU has been a strong major index, almost ignoring some of the weak antics of the SOX.X on a psychological note. Had bears been able to get the INDU to "crack" just a little, today's trade could have been different.

It wasn't... and bulls defended when they had to.

Jeff Bailey

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