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Index Wrap

Black gold, Big Blue and Big Tech

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The major indices reversed early session weakness to close at or near their highs of the session, where oil's reversal from new contract highs helped the Dow Industrials (INDU) 9,956 +0.23% recover after 3M (NYSE:MMM) $76.10 -2.41% plunged as low as $73.31, coming within 4 cents of a new 52-week low on weaker than expected earnings.

But strong earnings from IBM (NYSE:IBM) $85.92 +1.26% and a positive outlook had "Big Blue" extending gains in after-hours trading at $88.10, while fellow Morgan Stanley High Tech Index (MSH.X) 453.30 +1.46% component Texas Instrument (NYSE:TXN) $21.09 -0.61% traded as high as $22.20 after reporting quarterly earnings of $0.32, which was 4-cents better than consensus estimates.

November Crude Oil Futures (cl04x) - 30-minute intervals

Stocks reversed losses and extended gains just after the November Crude Oil futures (cl04x) slipped under its WEEKLY Pivot of $53.80 at 12:00 PM EDT, but buyers held firm at a near-term rising trend, which may have capped gains for the major indices into their close. I had to go back to early September to find a daily settlement below a WEEKLY Pivot, where even then, oil would not go below a WEEKLY S1, which would be $52.60 if a pattern of DIVERGENCE were to occur.

As I type (05:58 PM EDT), the NYMEX has November Crude Oil futures (cl04x) down 45 cents at $53.22, where session low has been $53.01 and Tuesday's high was made at the opening tick of $53.64.

Market Snapshot / Internals - 10/18/04 Close

The major indices recovered from their morning lows and began making a more notable attempt to build gains after 12:00, where the advance/decline lines turned positive at both the NYSE and NASDAQ by 01:00 PM EDT.

Both the NYSE and NASDAQ's 10-day NH/NL ratios are now in a column of "O" where it will most likely be up to stocks like IBM and TXN, or "big tech," as well as an abating oil price to push the major indices back higher.

While bullish leadership is starting to wane at the NASDAQ, bullish leadership hasn't totally evaporated. Here's an updated NASDAQ NH/NL point and figure chart with "f"ive day ratios charted, and the more important 10-day NH/NL ratios charted using the 3-box reversal method (2% box size) where O's depict supply exceeding demand, and X depicting demand exceeding supply. I plot correlative date PRICEs of the NASDAQ Composite (COMPX) 1,936.52 +1.3% in relation to the faster moving 5-day NH/NL ratios, which does continue to hold bullish confirmation of internals matching price action.

NASDAQ Composite NH/NL Ratio Chart - 2% box scale

Friday's "f"ive day ratio fell 2.7%, and today's "f"ive day ratio slipped a more fractional 0.2% as if the "f"ive day ratio of new highs versus new lows might not be willing to give a "sell singal" at 50%, but recent session's decline in the COMPX has seen some of the bullish leadership wane.

We can perhaps see how a reversal back higher in the 5-day NH/NL ratio would continue to suggest the possibility for bullish leadership to resume, perhaps enough to have the 10-day NH/NL ratio, which I just begin charting with "red O" also keep from giving a "sell signal" at 60%, which would violated the early October (Blue A) 62% reading.

Now let's take a look at our NASDAQ Composite (COMPX) 1,936.52 bar chart, where 1,900 has been holding as support.

NASDAQ Composite (COMPX) Chart - Daily Intervals

The very broad NASDAQ Comp. (COMPX) recently struggled with its rounding lower 200-day SMA, but found some important near-term support near its conventional 38.2% retracement of 1,905 and 1,900 round-number resistance. Since I'm monitoring the 52-week high/low ratios at the NASDAQ, I looked at the 35 components within the Morgan Stanley High Tech 35 (MSH.X) 453.30 +1.46%. Qualcomm (NASDAQ:QCOM) $43.60 +2.66% continues its torrid move higher with a new 52-weeker in today's session. LM Ericsson Telephone (NASDAQ:ERICY) $32.20 +1.54% is closing in on its most recent 52-week high of $32.32 found back in April.

Hey, both of these company's make either cell phone, or cell phone technology. Texas Instruments (NYSE:TXN) $21.09 is the worlds largest chipmaker for cell phones and is a component of the MSH.X.

Morgan Stanley High Tech 35 (MSH.X) - Daily Intervals

IF oil is going to reverse course, then it may be the "high beta" trade that buyers revert to, as buyers look for the "greater risk, but greater potential reward" trade to take hold.

As the MSH.X challenged its 200-day SMA just eight sessions ago, "Big Blue" traded $88.00 resistance for 4-days. As I type, last tick on IBM is.... $87.99, so sellers haven't given up yet.

Another individual stock benchmark I make is just last week and the MXH.X finding resistance at its 50% retracement when after Intel (INTC) $20.79 +0.87% reported its quarterly results, the stock trade an intra-day high of $21.53, but faltered from there.

Something's up in wireless telecom. Nokia (NYSE:NOK) $14.84 +5.84% is a percentage winner over the last 5-sessions. I've quickly listed the top 5 percentage winners and losers from the prior 5 sessions.

U.S. Market Watch - 10/18/04 Close

The CBOE Internet Index (INX.X) which has been flip-flopping either side of its slowly trending higher 200-day SMA (180) was today's sector winner with Internet security firm Checkpoint Systems (NASDAQ:CHKP) $21.10 +17.7% surging toward its 200-day SMA ($21.42) on stronger-than-expected earnings and upbeat outlook.

The S&P Insurance Index ($IUX.X) 284.12 +0.66% after its recent shellacking where Hartford Financial (NYSE:HIG) $54.35 -3.46% was a percentage loser in the sector. It's chart looks very similar to non-component Marsh McLennan (NYSE:MMC) $25.57 -12.43%, which sunk back towards Friday's 6-year low.

The AMEX Gold Bugs Index ($HUI.X) 221.36 -2.68% was lower, not on dollar strength, but Harmony Gold (NYSE:HMY) $11.50 -8.43% saying it might buy Gold Fields Ltd. (AMEX:GFI) $14.29 -4.35% should its proposed deal with IAM Gold (AMEX:IAG) $7.24 -8.93% not go through. All three stocks comprise the non-weighted $HUI.X. Sector bellwether Newmont Mining (NYSE:NEM) $44.75 -0.06% edged down 3 cents.

Pivot Matrix -

Prior to the 04:15 PM EDT closes for the trackers (DIA, SPY, QQQ) we did see a buy program premium generated, just as IBM reported its headline numbers.

While the SOX.X never could get a trade at its WEEKLY Pivot, and perhaps "confirm" some of the last session strength that the NDX/QQQ were finding just above their WEEKLY R1s, the earnings from Texas Instruments (NYSE:TXN) and higher trade in after hours did have the Semiconductor HOLDRs (AMEX:SMH) $29.92 +0.53% trading as highs as $30.59 at last tick in tonight's extended session.

I looked at the QCharts-derived WEEKLY Pivot levels for the SMH which are as follows (S2 to R2), $28.51, $29.13, piv=$30.25, $30.87, $31.99, which would suggest a SOX.X opening above its WEEKLY Pivot.

Jeff Bailey

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