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Index Wrap

The first battle of Bull Run

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The major indices ended lower, where today's declines mark the end to a "bull run" of five straight sessions of gains, where a 0.7% decline in June personal spending kept buyers on the sidelines.

In June of 1861, despite their acceptance of slavery, Delaware, Kentucky, Maryland and Missouri did not join the Confederacy. Although divided in their loyalties, a combination of political maneuvering and Union military pressure kept these four states from seceding.

Then, in July of 1861, public outcry pushed General-in-Chief Winfield Scott to advance on the South, before adequately training his untried troops. General Scott ordered General Irvin McDowell to advance on Confederate troops stationed in Manassas Junction, Virginia.

On July 21, McDowell attacked and was initially successful (for 5-days?), but the introduction of Confederate reinforcements resulted in a Southern victory and a chaotic retreat toward Washington by federal troops. Today's bullish retreat would certainly not be considered chaotic with the Dow Industrials (INDU) 10,120 -0.57% falling 59 points, but tech bulls seemed to be more eager to "retreat" with no shoes or socks (read SOX.X) on their hooves with the Semiconductor Index (SOX.X) 402.96 -3.76% looking eager to be the first equity- based index in our WEEKLY Pivot Matrix to get a trade at WEEKLY S1 (397.31).

U.S. Market Watch - 08/03/04 Close

My "sentiment" indices had the Securities Broker/Dealer Index (XBD.X) 118.03 -1.34% and S&P Retail Index (RLX.X) 378.90 -1.66% rather tightlipped to sound a further bullish "charge!" on their trumpets, while 5-day percentage loser and the Disk Drive Index (DDX.X) 93.65 -3.29%, Health Provider Index (RXH.X) 343.85 -1.77% and Airline Index (XAL.X) 44.17 -2.32% left the battlefield looking tattered and torn.

Aside from the Cyclical Index (CYC.X) 683.04 -1.10%, recent 5-day percentage gainers showed some relative strength, or held onto fractional gains by the close.

Treasuries finished at their highs of the session, where ahead of next Tuesday's FOMC meeting, traders begin to contemplate whether or not the Fed will raise its target for fed funds to 1.50% from 1.25%, where higher oil/gasoline prices, which some say creates an "artificial tax" on consumers, has the Fed holding steady at 1.25%.

Market Snapshot / Internals - 08/03/04 Close

I may have jinxed today's attempt for bulls to stand their ground when reviewing the chart of the NYSE Composite ($NYA.X) at 01:00 PM EDT (see intra-day update) and while the stronger NYSE Composite (read General Irvin McDowell) found fractional gains, the weaker NASDAQ Composite (COMPX) and troops with 4 or 5- letters stitched to their lapels, were running from the battle field.

Eighty-nine generals showed up at the NYSE today (read new 52- week highs), while 42 troops (read new 52-week lows) were sent to the infirmary.

While the NASDAQ's 10-day NH/NL ratio reversed up to 22% on its point and figure chart, it looks to have been carryover from the prior three sessions, where today's 38 new highs are nearly half of yesterday's 65, while today's casualties and 100 new lows grow for a third-straight session. In essence, the "generals" at the NASDAQ are in desperate need of supporting troops, or their numbers will most likely dwindle from here.

"The Generals" - 33-most heavily weighted OEX components

Software giant Microsoft (NASDAQ:MSFT) $28.07 -1.57% and energy giant Exxon/Mobil (NYSE:XOM) $46.89 +1.39% traded places at the #2 and #3 most heavily weighted OEX component slots. In the context of "generals" equating to market caps size, even a general needs a supporting staff if they're to win the battle.

In today's 01:00 intra-day update, I noted some near-term resistance in the NYSE Composite ($NYA.X) at the 6,436 level, and at up until the final 5-minutes of trade, the small-caps of the Russell-2000 Index ($RUT.X) 543.63 -1.5% were struggling to hold a near-term level of retracement support.

Russell-2000 Index ($RUT.X) - Daily Intervals

Just looking at the Russell-2000 Index ($RUT.X) 543.63 -1.5% gives us a weaker major index of small cap stocks to compare to the STRONGER NYSE Composite ($NYA.X), where similar conventional use of retracement (gives us levels as reference points) as well as similarly drawn trends (as used on the NYSE Comp.).

My observation is that the RUT.X is WEAKER than the NYSE Composite, not only at old downward trend (solid red), but the RUT.X was not able to challenge its 38.2% retracement (March highs and May low retracement) as we witness in the NYSE Composite.

Weakness tends to lead weakness.

Please note that the NASDAQ-100 Index (NDX.X) 1,379.14 -1.93% and its Tracking Stock (AMEX:QQQ) $34.23 -2.08% did show greater weakness than the Russell-2000 Index ($RUT.X) last week, when the NDX.X briefly pierced below its May low of 1,372.46. Also note the Semiconductor Index (SOX.X) 402.96 -3.76% traded below its May low (432.97) on July 14th.

Pivot Analysis Matrix -

In the context of "generals" and "troops," I'd consider the "troops" to be depicted by the NDX/QQQ and SOX.X at this point. Certainly some troops can become generals in the military, but when we look at the pivot matrix and correlations into tomorrow's trade, correlative support levels for NDX/QQQ and SOX.X are largely found at WEEKLY S1, while the INDU, SPX, OEX and BIX.X are at WEEKLY Pivots.

Jeff Bailey

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