Option Investor
Index Wrap

Actions will speak louder than words

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Word from Saudi officials that they were willing and able to boost oil production had the major indices lifting from their early morning lows, but oil traders staged an intra-day rally of their own, with neck braces strapped tight, as September Crude Oil futures (cl04u) $44.80 settled higher near the $45.00 level after having traded as low as $43.30.

Oil traders don't know who to believe. Saudi officials say oils rise is being fueled by hedge fund speculators, and not necessarily global demand. Saudi officials have also said they could, then couldn't increase daily production levels.

When media outlets first began reporting that "OPEC will make a major announcement later this morning," equities firmed almost immediately as investor sentiment seemed to level from some very bearish opening session indications.

While most technology-related sectors were getting dismantled, the "oil had nothing to do with them" Biotechnology Index (BTK.X) 464.22 +1.99% was the first tech-based sector to turn green.

U.S. Market Watch -08/11/04 Close

Both the Semiconductor Index (SOX.X) 372.67 -5.16% and Disk Drive Index (DDX.X) 88.52 -3.11% traded 52-week lows in today's session, and while Dorsey/Wright and Associates has not yet fully tabulated today's trade, their Semiconductor Bullish % (BPSEMI) may be pressed to hold onto yesterday's closing reading of 4.97%, meaning that of the universe of semiconductor-related point and figure charts they follow, roughly 5% of those point and figure charts would still have a buy signal associated with their chart.

Today's "big surprise" was the S&P Banks Index (BIX.X) 349.07 +0.74% not only trading and closing above its WEEKLY R1 in our pivot matrix, but slicing back above its 50-day SMA (347.80) and 21-day SMA (348.17). Helping the more regional banking index was the Mortgage Bankers Association saying the Refinancing Index rose 2.5% for the week ended August 6, and ending 4 week's of declines, as the average contract interest rate for a 30-year fixed-rate mortgage decreased to 5.8% from 5.97%, and lowest 30- year mortgage rate since the week ended April 9. The more encompassing Mortgage Application Index fell 0.7% to 616.10, with the Purchases Index falling 2.7% to 440.0.

Market Snapshot / Internals - 08/11/04 Close

One can never say for certain, but there was enough "bad news" among technology to bog down a Cisco router at the open, and reports that "OPEC is going to make a major announcement" may have brought in some bears to lock in gains. Once it started it didn't stop as A/D lines at both the NYSE and NASDAQ showed some improvement, but still ended the day weak.

Today's 257 new lows at the NASDAQ rival this year's 259 from July 26, when the very broad NASDAQ Composite (COMPX) 1,782.42 -1.45% closed at 1,839.02. In essence, a lot of NASDAQ "troops" were removed from the battlefield, and very few "generals," just 15, were able to raise their swords at the end of the day.

Pivot Analysis Matrix -

Hmmm.... strength for tech? I can't think of any sector at this point, so the WEAKEST and the MOST OVERSOLD Semiconductor Index (SOX.X) 372.67 -5.16% will have to do, where a start would be something above correlative DAILY R1 and MONTHLY S1. The SOX.X was in "free fall" mode in the opening minutes, and while there were "ticks" at 392.51 in the opening minute of trade, the intra- day chart in the first 5 minutes looks more like a Jack and Jill tumbling down the hill, so I'm using this afternoon's high as today's high.

With the BIX.X closing just back above its MONTHLY Pivot and being first equity-based index to trade WEEKLY R1, a sign of any follow through strength for the majors would be an OEX move above correlative DAILY R1 and WEEKLY Pivot, while tomorrow's DAILY R2 and 530 would tie to relative low closes for the OEX in May and mid-July, when broken on August 6, Tuesday of last week, found the OEX trading its most recent lows of 521.83 that same day.

Note the INDU, SPX, OEX and BIX.X were the equity-based indices that didn't violate Tuesday's lows.

Jeff Bailey

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