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Pepper spray stings for about 30-minutes

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A "false alarm" created some intra-day gyrations where economic reports received far less attention than weekly oil inventory data that showed a larger draw on supplies than analysts had expected, while a pepper spray incident near the International Monetary Fund building in Washington D.C. created some intra-day volatility for stocks.

Stocks looked poised to erupt in the first hour of trade after the 10:00 AM EDT release of economic data had July construction spending and the August ISM Index pretty much inline with economists' forecast.

Economists' were on target today as even the difficult to forecast August auto sales (5.2 million) and truck sales (8.2 million) were darned near identical to economists respective forecast of 5.4 million and 8.2 million.

But just as the major indices approached their DAILY R2s in the pivot matrix, the 10:30 AM EDT release of weekly oil, gasoline and distillate inventories helped put a lid on early morning bullish enthusiasm.

And it was a lid, not a sharp reversal that took place on the oil data.

It wouldn't surprise me that the young boy who grabbed the girls "pepper spray necklace" might be named "Jeff." That's something I as a kid would have done on a field trip back in my youth.

While the names of today's pepper spray incident have been withheld, I'm going to say it was Charley that was yanking Frances' chain, where an accidental discharge of pepper spray near the International Monetary Fund in Washington D.C. created some jitters and saw stocks make a sharp intra-day move lower, get snapped back up when news reports became more factual.

While news out of Iraq is sketchy at times, so were the initial reports out of Washington D.C. Everyone was quick to assume the worse.

U.S. Market Watch - 09/01/04 Close

The names Charley and Frances are used as Hurrican Charley, which struck Florida just two weeks ago, and the rapidly approaching Hurricane Frances may have had some impact on broader financials, specifically the S&P Insurance Index ($IUX.X) 313.15 -1.05% today.

Just prior to Hurricane Charley reach Florida the weekend of August 14 and 15, the S&P Insurance Index ($IUX.X) has been under some heavy selling pressure to the 300 level, where since that time, the IUX.X had reclaimed both its trending higher 200-day SMA (313.58) and still trending lower 50-day SMA (313.89), but with Hurrican Frances on her way and some industry watchers saying her wrath could be worse that Charley's, I'd have to think some bulls were in the profit taking mode among insurers, perhaps getting ready to reload for another long at lower levels.

Market Snapshot / Internals - 09/01/04 Close

We'll look at some intra-day 30-minute interval charts in a minute, but if you were out playing golf and looked at some intra-day charts, you'd think there was a major "bad tick" across all the indices in today's trade just after 01:00 PM EDT.

Internals were healthy all session. Excluding a brief 30-minute interval just after 01:00 PM EDT, the TRIN spent the bulk of the day below 1.0.

Hmmmm.... The number of new highs at the NYSE ended at 176. This might be ominous as the last time we saw this many new highs was July 1 (174) and July 7 (180). On July 1, the SPX opened at roughly 1,140, and the opening tick was the high for the month. With September being the most bearish month historically, bulls might be a little careful after the NYSE 10-day NH/NL ratio has rebounded from 30% (August 16) to 87%. Make no mistake that there's some bullish leadership among 1, 2 and 3-lettered stocks.

Now, NASDAQ's leadership indications are also much improved, but still lagging the NYSE. Much improved as in early-to-mid August, the NASDAQ's 10-day NH/NL ratio did reverse up to 22%, but then faded back to a recent low reading of 10.2% (August 17), but this reversal back higher we're still in has the 10-day NH/NL ratio making a higher high at current best 51.7%.

While just about every piece of fundamental analysis I read has analysts bracing for a terrible Intel (INTC) mid-quarter update and a not so healthy nonfarm payroll figure, the internals are suspiciously strong.

Outside the major market Bullish % indications of course, which we touch on in each morning's 09:00 intra-day updates.

I wanted to take a quick look at the October Crude Oil futures (cl04v) contract with the QCharts' WEEKLY Pivots turned on. Get some "here's where we've been, here's where we are" perspective.

October Crude Oil futures (cl04v) - 30-min. Intervals

Last week, the major indices were stuck in a very tight range of trade, and I thought the only thing that partially unclogged the log jam was when the October futures contract broke below Tuesday's low of $44.75, where that break at about 12:00 PM EDT, brought a bid into equities, where on Wednesday, stocks rallied to their close, then began their sideways trade the remainder of the week.

So far this week, October futures extended losses, but have found support at this contract's WEEKLY S1, where today's inventory data finds oil rebounding from $42.00 to $44.00, where it would appear, and logically so, that the WEEKLY Pivot finds some selling.

OK. While oil isn't the only game in town, I had previously stated that we wanted to keep an eye on $44.75 (seemed to draw a reaction from the equity markets), and I would think if oil moved much above $44.75 or $45.00, its going to have some psychological impact on stocks.

Remember that we're looking at 30-minute intervals, so the simple moving averages we're looking at are NOT the daily moving averages.

S&P Depository Receipts (AMEX:SPY) - 30-min. Intervals

I'm showing the S&P Depository Receipts (AMEX:SPY) with the QChart's WEEKLY Pivot levels, which surprisingly enough, match my levels in the Pivot Matrix this week. While compressed, you can see that the SPY reaction to the 10:00 AM release of July construction spending and August ISM Index figures was rather bullish, with the SPY jerking above its MOTHLY Pivot.

I note that the SPY 200-DAY SMA (from a daily interval bar chart) would have this key longer-term SMA marking today's high, where today's high just so happens to be correlative with the 10:30 AM EDT release of weekly crude oil inventories.

See how the SPY "eased" into its WEEKLY Pivot. It didn't have a sharp and overly negative reaction to the oil data. A trader/investor might take on the mindset that this is because oil hasn't reclaimed a significantly higher price level. Say.... $44.75.

I'd also note some similarity between the Oil futures WEEKLY Pivot and the SPY weekly pivot.

I also point to today's "pepper spray" incident. I've never been pepper sprayed, but I hear it burns for about 30-minutes if you can flush it out with some water.

NASDAQ-100 Tracker (AMEX:QQQ) - 30-min. Intervals

Now, we've seen how the weakness in the SOX.X has been a drag on the QQQ, and with that drag, the QQQ doesn't appear to have been as positively impacted by oils decline as perhaps the SPY has. Hey, the QQQ doesn't have any financials in it either.

The QQQ is also weaker in its WEEKLY Pivot.

When looking at the QQQ's 30-minute chart, one thing that stands out is the QQQ trade action around its 200-pd SMA. In mid-August the QQQ rebounded to this 200-pd SMA, which served some resistance, and not unlike some of the recent breaks of "old downward trends" on the SPX and INDU daily charts, the break above this 200-pd SMA has served support twice. Once immediately after the mid-August break above, and then again yesterday (Tuesday).

As I try and project this upward trending 200-pd SMA, I can almost see it coming right up to the QQQ's WEEKLY S1 into tomorrow's close. After the close, Intel (INTC) $21.43 +0.65% will give its mid-quarter update.

A 30-minute interval chart of Intel (NASDAQ:INTC) would have its 200-pd SMA higher at $21.72.

Pivot Matrix -

The S&P Banks Index (BIX.X) 359.53 -0.75% and the Semiconductor Index (SOX.X) 374.16 +0.84% traded places today. Sometimes I get the feeling that the BIX.X is standing atop a ladder, trying to hold up a 360-pound center beam of a roof, and is staring at the floor (the SOX.X) as if to say.... "hey, can I get a little help here?"

I missed the marking of 3 levels of correlative resistance for tomorrow in the SOX.X at the 383.60 level as I didn't mark the MONTHLY Pivot.

The ONLY reason at this point that I could see a rally in the SOX.X is simply due to a short-covering rally as bear's risk in the sector remains highs. As of tonight's close, Dorsey/Wright's Semiconductor Bullish % (BPSEMI) remained in "bear confirmed" status at 11.04%, meaning that for every 100 semiconductor- related point and figure charts, just 11 would have a point and figure buy signal still intact. The recent low reading has been 6% in early August, and we'd have to go back to late September of 2001 to find this sector bullish % at 6%.

You can NOT make a direct tie between bullish % indications and an index/sector price, but if I were to try, I'd have to think a move above 385 in the SOX.X might find Dorsey's Semiconductor Bullish % (BPSEMI) reversing up to the needed 12% to achieve "bull alert" status. If I really stretched my assessment of upside risk, then perhaps MONTHLY R1 and current WEEKLY R2 might find Dorsey's Semiconductor Bullish % (BPSEMI) achieving 34% and "bull confirmed."

Jeff Bailey

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