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Index Wrap

Gold and Internets were leaders in 2003

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Gold, and metals stocks as well as Internet stocks were BIG percentage gainers as the major average lifted from their 2002 lows, and for those bulls reminiscing of a very bullish 2003, a renewed bullish interest from some deeply oversold longer-term levels of bullish percent in precious metals and Internet stocks, as well as the major averages relatively unchanged on the year, and showing some bullish life, may well have bulls licking their chops as the third quarter of 2004 draws near.

While the AMEX Gold Bugs Index ($HUI.X) 208.74 +2.3% remains well off its December 2003 and early January 2004 highs of 258.60, the gold bugs have been resilient in recent months and were pressing some of their favorites higher to it HUI's 200-day SMA (210.28) again today, where after reaching a deeply oversold bullish % reading of 12% in May, 41.67% of the stocks followed by Dorsey/Wright and Associates now show point and figure buy signals associated with their supply/demand charts as sector strength resumes from some deeply oversold levels.

Just yesterday, Dorsey's Internet Bullish % (BPINET) reversed up to "bull alert" status at 24.7% after falling to 18% in early August. Bellwether's Yahoo! Inc. (NASDAQ:YHOO) $33.18 +4.11% and eBay (NASDAQ:EBAY) $94.41 +2.50% lead the CBOE Internet Index (INX.X) 178.17 +1.61% higher in today's session, with the INX.X closing just above its flat-to-rising 200-day SMA (178.13) at session's end.

U.S. Market Watch - 09/14/04 Close

When I left on vacation it made sense that with the VIX.X below 14.00 we might look for a pullback in the major indices, but that hasn't happened and the VIX.X is close to its April 23, 52-week low reading of 12.89.

I've marked several of this week's quarterly expiration "Max Pain" Theory levels, where one would have to think current levels of trade and the lower VIX.X may well be indicative of covered call writers, if not naked call writers buying back some calls as the markets have snapped back strong from their early August lows.

In the past 5-session the Semiconductor Index (SOX.X) 393.50 +0.10%, which has been the WEAKEST of sectors in recent months is suddenly a percentage gainer. Here too Dorsey/Wright and Associates' Semiconductor Bullish % (BPSEMI) which fell to a multi-year low reading of 6% has just recently reversed up to "bull alert" status at 14%, with Monday evenings reading further improved to 18% as some bearish risk becomes realized.

Tuesday's official settlement for October Crude Oil futures (cl04v) was $44.39, where oil bid as Hurricane Ivan enters the Gulf of Mexico where traders are uncertain of what type of damage, if any, Ivan's impact may have on offshore oil and gas producing platforms and pipelines.

Market Snapshot / Internals - 09/14/04 Close

Internals at the A/D line were negative the entire session, and while a late session dip below 0.76 and the TRIN's DAILY Pivot did see some improvement in the A/D line, the major indices were little changed.

After updating last week's NH/NL indications, today would be the first day the more bullish, yet overbought NYSE 5-day NH/NL ratio would show a slight bearish cross under of its 10-day NH/NL ratio.

Notable new 52-week highs among NYSE and Dow Components in today's session were Home Depot (NYSE:HD) $38.14 +1.89%, Johnson & Johnson (NYSE:JNJ) $58.35 +0.34%, Verizon (NYSE:VZ) $40.81 +0.64% and Exxon/Mobil (NYSE:XOM) $47.47 -0.06%.

General Electric (NYSE:GE) $33.82 +0.2%, which has its fingers in just about every piece of the global economic pie has been bumping the $34.00 level in recent sessions, and close to its January 28, 2004 52-week high of $34.57.

I'd like to thank Leigh Stevens and Jonathan Levinson for filling in for me last week with the Index Trader Wraps, and while I haven't had time to fully read their insight and analysis, my eyes are glued on what I've felt was the "leadership" index for strength and the very broad NYSE Composite ($NYA.X), which just before my vacation departure, was showing some technical strength above the 6,505 level.

NYSE Composite ($NYA.X) Chart - Daily Intervals

I have shown the NYSE Composite ($NYA.X) with the BLUE conventional retracement from its March highs to May lows, and the recent rally from its August lows is quite similar to that found in May.

Overriding trend would now be up with the break above my "cheater's trend."

It would be as tough a bullish action point for many 1, 2, or 3- lettered stocks in here based on technical observations dating back to June, but with the NYSE NH/NL 10-day ratio above June's 83.4% peak, a close above my "fitted" 38.2% retracement (PINK) could set the course for further gains to the 6,700 level.

In late August and early September I thought further gains would only come if the WEAKER NASDAQ NH/NL ratios could build, giving some "lift from the bottom" as I like to think of it, and we've certainly seen that the past week with the NASDAQ's NH/NL 10-day ratio gaining from its September 3 reading of 55.5% to tonight's 67.5 reading.

S&P 500 Index (SPX.X) Chart - Daily Intervals

A rather narrow range of trade last week leaves us with a rather narrow WEEKLY Pivot analysis retracement this week. I believe Jonathan Levinson and Keene Little have commented that some of their technical indicators have shown near-term resistance from 128-132, which would also be marked by WEEKLY R1 and WEEKLY R2, as well as an old "cheater's upward trend" that I continue to leave in place from the May relative lows.

With the NYSE Composite ($NYA.X) showing the technical ability to break above its DOWNWARD "cheater's trend," I'd have to use the stronger NYSE Composite as a leading index to still have a more bullish bias to the SPX.X.

Banks as depicted by both the more regional S&P Banks Index (BIX.X) 363.91 (unch) and super-regional and multi-national KBW Bank Index (BKX.X) 99.49 +0.15% have been resting the past week, while it has been strength from technology giving some further lift to the SPX.

On the SPX chart, I've marked what I'd consider to be more of a "psychologically round" 400 level tie in with the Semiconductor Index (SOX.X), where the Pivot Matrix would show some correlative resistance at 407.

Pivot Analysis Matrix -

One of the better correlations found in the Pivot Matrix for tomorrow is in the S&P 100 Index (OEX.X) 546.93 +0.15%, which managed to eek out a 1 point gain in today's trade.

OEX resistance is common at 548 and with some after-hour gyrations in the NASDAQ-100 Tracker (AMEX:QQQ) $35.63 +0.14%, which ticked by at $35.55 in extended hours, OEX support at 545 and DAILY S2 and WEEKLY Pivot, which has not been traded this week, would be important near-term support.

Shares of Oracle (NASDAQ:ORCL) $10.55 -0.65% last ticked by at $10.87 after the software maker reported its quarterly earnings, while programmable chipmaker Xilinx (NASDAQ:XLNX) $29.04 -0.51% plunged to $27.90 after its mid-quarter update.

Xilinx (XLNX) said it now expects revenues to be down 5-7% sequentially, a decrease from original guidance of up 2-4% sequentially, with gross margins slipping to 64%, which was slightly below prior margin guidance of 65%.

The Semiconductor HOLDRs (AMEX:SMH) $31.07 +0.51%, which did bump up against their WEEKLY R1 of $31.37 in Monday's trade, last ticked by at $30.80. According to QCharts' pivot algorithm and last week's high/low/close, the SMH WEEKLY S2 to R2 is $26.80, $28.59, P= $29.57, $31.37 and $32.36.

Jeff Bailey

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