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Retailers rocked, while Intel got socked

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After reporting what many described as lackluster same store sales for the retailers, the S&P Retail Index (RLX.X) 401.22 +2.79% lead the list of percentage index/sector gainers as the broader S&P 500 Index (SPX.X) 1,118.31 +1.12% jolted higher by 12 points to reclaim its rising 200-day SMA (1,119.11) and come within fractions of its WEEKLY R2.

An intra-day reversal in oil prices, where the October Crude Oil futures contract (cl04v) settled at $44.06 after trading as high as high as $45.40 helped fuel bullish investor sentiment to the close.

It isn't until after the close that I realize Treasuries saw a sharp round of selling across the major maturities, where the benchmark 10-year yield ($TNX.X) jumped 7.1 basis points to close out at 4.194%, where it would appear that every dollar coming out of Treasuries found its way to stocks.

U.S. Market Watch - 09/02/04 Close

What's up with that? Doesn't the MARKET know there's an important tech-related mid-quarter update coming from Intel (NASDAQ:INTC) $21.62 +0.88%? Not to mention an important nonfarm payroll number tomorrow morning?

While economists predict nonfarm payrolls to show a 150,000 gain, Jim Brown alerted traders in Wednesday night's Futures Monitor that he heard the Monster Employment Index (from job poster Monster Worldwide (MNST)) had been leaked early and was very weak. CNBC's James Cramer said the same thing on Wednesday evening.

Surprise! The Monster Employment Index came in at 145 compared to 134 in July.

Shares of Monster Worldwide (NASDAQ:MNST) $21.78 +5.26% jumped $1.09, while payroll firm Paychex (NASDAQ:PAYX) $30.55 +2.75% gained 82-cents.

S&P Retail Index (RLX.X) - Daily Intervals

I swore I was having problems with my QCharts charting software this morning when the RLX.X ticked 394.00 at the open. As the RLX.X reached its QCharts WEEKLY R1 of 396.17 and seemed to be capped at that level from 10:05 AM through 01:00 PM EDT, I was typing up a day trade short in Dollar Tree (NASDAQ:DLTR) $24.84 +5.03% as DLTR was finding some resistance at $24.20. Fortunately I saw oil slipping back below $44.75 and didn't post the trade profile in the Market Monitor.

But when the RLX.X took out its WEEKLY R1, I scrambled for a long and Wal-Mart (NYSE:WMT) $53.02 +0.74% seemed attractive at $52.39 on thought it might try and play catch up after trading as high as $53.18 just after the open. Wal-Mart has been a VERY WEAK retailer, but when the tide is rising, a lot of boats will lift.

And while the retailers were rock'n, Intel (NASDAQ:INTC) $21.62 +0.88% got socked lower in tonight's after-hours session, where last tick is $19.98 after the chip-giant gave investors a disappointing mid-quarter update.

Here's a longer-term look at Intel (NASDAQ:INTC) that I want to share tonight. The stock looks TERRIBLE from the bullish perspective, but with Dorsey Wright and Associates' Semiconductor Bullish % (BPSEMI) at such deeply oversold levels of bullish %, this is THE STOCK among chips to be monitoring in the weeks to come.

The stocks at a 52-week low, the news is NOT GOOD, and RISK for BEARS is very high.

Here's a chart I put together several months ago using the "fitted retracement" technique. I've been monitoring this chart from time-to-time and trying to get a feel for the sector bellwether, in combination with the Semiconductor Bullish % (BPSEMI) from Dorsey Wright.

Intel (INTC) Chart - WEEKLY Intervals

The BLUE retracement levels was derived by anchoring retracement at a low, then "fitting" its 38.2% retracement at a sharp rebound high weekly close of $20.88, where the resulting BLUE levels are just that. Results. I think of that as the "bullish" retracement and it is interesting how INTC amazingly achieved a little more that 100% at $33.70. Things were certainly bullish back then as Dorsey/Wright's Semiconductor BULLISH % (BPSEMI) had skyrocketed to 88% bullish and BULLS had a VERY HIGH degree of risk. Very strong back then, but HIGH level of bullish RISK.

The PINK retracement was derived by anchoring retracement at a high, then "fitting" its 38.2% ($28.92) at what seems to have been an important level. The resulting PINK levels are just that. Results.

You can't call a bottom in Intel (INTC) at this point, but continue to make some observations from the bullish % indications when have recently been as low as 6%. VERY WEAK internals, but also at a level where BEARISH RISK is VERY high.

It has always been my opinion that the SOX.X goes nowhere without Intel (INTC) leading the advance.

Next week I will be out of the office the entire week, but I'd be checking in on Intel (INTC) from time-to-time.

Watch WEEKLY volume levels. Often times a "bottom" will be found on CLIMACTIC volume. Intel looked to have found a bottom in that $22.57-$23.33 zone as upward trend was being tested and WEEKLY volume spiked to 602 million shares. So far this week, volume is a more modest 256.5 million. Who knows how many shares it will trade tomorrow.

It doesn't matter if you're BULLISH or BEARISH on Intel (INTC) right now. Do you think Intel can get a close above $20.88 tomorrow?

If it does, will it be a bullish surprise? Most MARKET participants were expecting a poor mid-quarter update. Now we've got it.

There's an old market saying that all the bad news comes out at the bottom. Intel is closer to a bottom tonight than it has been this year.

Watch that 10-week SMA (50-day SMA equivalent). Note how INTC traded around that 50-day SMA in late 2002 and then early 2003. Get a feel for it. Say it. Above it, then below it, then above it to the moon.

I've also overlaid the bullish % inflection points from Dorsey Wright's Semiconductor Bullish % (BPSEMI) on Intel's chart. This gives us a feel and observation of SECTOR risk as well as various cycles of strength and weakness and how Intel traded within those cycles.

Market Snapshot / Internals - 09/02/04 Close

I was ready for some equity weakness as oil moved above the $45.00 level and had upside (for bearishness) alerts set on my TRIN at 1.00 and the VIX.X above its DAILY Pivot of 15.00, but other than just after the open, neither alert was triggered.

Internals improved throughout the session, but I think we can see how they stalled a bit at the a/d line during the mid-point of the session. But as crude oil slipped back below this week's WEEKLY Pivot, sentiment just seemed to improve.

Pivot Matrix -

Last tick in after-hours trade for the QQQ was $34.49, and tomorrow morning, semiconductors and the QQQ will most likely be an active trade.

Early correlative support for the NDX/QQQ is marked at DAILY S1 and WEEKLY Pivot.

The Semiconductor HOLDRs (AMEX:SMH) closed at $29.99 and last tick was $28.80 in after-hours. To get some idea of where the SOX.X might open based on the SMH after-hour trade, according to QCharts' WEEKLY Pivot levels for the SMH its WEEKLY Pivot is $30.23, WEEKLY S1 is $29.49, and WEEKLY S2 is $28.73, so it would appear the SOX.X might open somewhere between its WEEKLY S2 and DAILY S2. If violated to the downside, then next risk level lower is MONTHLY S1.

OK, keep and eye on Intel (NASDAQ:INTC) and perhaps that fitted retracement weekly bar chart shown. Sometimes it is useful to use a different technique like that shown with INTC, then combine it with the pivot level for the SOX.X to get a feel and observation for things.

Jeff Bailey

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