Option Investor
Index Wrap

Lights went out at 11:00

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The major indices as well as all equity-based sectors finished at their lows of the session, where at approximately 11:00, buyers pulled the plug on stocks and my real-time charts.

The S&P 500 Index (SPX.X) 1,093.88 -1.33 saw a "round trip" with its first test of WEEKLY R1 finishing with a first test of WEEKLY S1.

While software giant Microsoft (NASDAQ:MSFT) $28.96 +2.25% and its revealed cash to shareholder distribution plan was a main topic on Wall Street, sellers seemed more than eager to greet the Semiconductors (SOX.X) 407.81 -3.69% with a pile of stock as it attempted to reclaim its MONTHLY S2.

Pivot Analysis Matrix - 07/21/04 Close

Last thing I remember for a live intra-day view was the S&P 100 Index (OEX.X) 533.02 -1.22% sounding alert at its WEEKLY R1. I said to myself.... "Can it get back through that 'doji' at 545 from the June 1 open and close?"

That's when the "lights went out," and all heck broke loose to the downside.

Dow Industrials (INDU) Chart - Daily Intervals

Last night, I was in a very bad mood, it was late, and I couldn't sleep. So, I started thumbing through some of the Dow Components and noted a number of components trade "just above and below" their 200-day SMA's.

Aha! I thought. I'll set some upside and downside alerts on my trusty QCharts trading software, and should any Dow components trade these longer-term SMAs, I'll get a very unbiased, and true depiction of the markets strength/weakness at this longer-term SMA.

Made sense with the INDU below its 200-day SMA.

The first upside alert I got at a 200-day SMA was American Express (NYSE:AXP) $48.35 -1.56% as it traded back higher to its 200-day SMA ($49.49). Aha! A financial I thought. They're coming back. By the close, the merchant at the counter said... "sorry sir, your card has been rejected."

Minutes later, Dupont (DD) $42.15 -1.4% traded its 200-day SMA to the upside, but failed miserably. DD's bar chart and moving averages look almost IDENTICAL to the INDU.

At 12:00, I "fixed" my QCharts software, and haven't been able to get a quote since.

So.... I went back to my trusty paper/pencil notes of other Dow Component stocks and their trade relative to their longer-term 200-day SMAs.

I see Caterpillar (NYSE:CAT) $76.95 -1.43% popped higher at the open, but closed back BELOW its 200-day SMA ($77.49).

A bullish "ouch!" for Coca Cola (NYSE:KO) $49.20 -1.75%, which started the session out above its 200-day SMA ($49.32).

3M (NYSE:MMM) $83.58 -1.67% still above its 200-day SMA $81.82.

United Technologies (NYSE:UTX) $92.67 +2.31% traded higher above its 200-day SMA ($88.71), where Tuesday's close was $90.57.

Alcoa (NYSE:AA) $31.15 -3.11%, which started out below its 200- day SMA ($33.39) fell further below today.

Disney (NYSE:DIS) $23.64 -1.08% still below its 200-day SMA ($24.06).

JP Morgan (NYSE:JPM) $36.82 +1.15% came close to testing its 200- day SMA ($37.88) with a session high of $37.80, but not unlike the Broker/Dealer Index (XBD.X) 117.57 -0.81% faded to the close.

Merck (NYSE:MRK) $44.59 -0.53% popped, then dropped, never getting an upside test of its 200-day SMA ($46.29).

Verizon's (NYSE:VZ) $34.13 -1.72% "can you hear me now" becomes less audible as the stock closed at its lowest level of 2004, with the 200-day SMA ($35.57) straight-lining across the chart.

So.... at 10:21, I counted 2 up (AXP and DD) and zero down, but by the close, 2 are still down (AXP and DD) and we can add KO and CAT to the list of INDU components signaling some longer-term weakness below the 200-day SMAs.

We'll continue to follow, but buyers have a lot of work to do.

Jeff Bailey

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