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Index Wrap


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Broader market declines had the look of profit taking in Tuesday's session, where despite a lower trade in oil, inflationary woes at the producer level had the major indices and bulk of sectors all relinquishing a portion of recent week's gains.

But that might have been the extent to profit taking among computer-related technology after Dow component Hewlett-Packard (NYSE:HPQ) $19.68 surged to $21.14 in its extended session after handily beating its own lowered expectations.

"After a challenging third quarter I am pleased with the progress we made in the fourth quarter," HP Chairman and Chief Executive Carly Fiorina said on a Tuesday evening conference call.

Specifically, she said that the supply issues that caused a dramatic shortfall during third quarter had been solved. "This issue is now behind us," Ms. Fiorina said. She said HP shipped a record number of standard Intel servers during the quarter, with unit shipments rising 18% in the fourth quarter.

The Palo Alto, California-based company reported net income for its fiscal fourth quarter ended October 31 of $1.09 billion, or 37 cents per share, compared with $862 million, or 28 cents per share, a year earlier.

Revenue rose to $21.4 billion from $19.9 billion. Excluding items, HP posted a profit of 41 cents per share, compared with its previous forecast for a per-share profit of 35 cents to 39 cents.

Shares of Intel (NASDAQ:INTC) $23.84 +0.29% rose to $24.08 in Tuesday's extended session. The NASDAQ-100 Tracker (AMEX:QQQ) $38.59 gained 12 cents to $38.71, while the Semiconductor HOLDRs (AMEX:SMH) $33.53 -0.29% rose 35 cents to $33.88, just 10-cents shy of their WEEKLY R2 in the evening session.

U.S. Market Watch - 11/16/04 Close

Hewlett-Packard (NYSE:HPQ) is a component of several indices in our U.S. Market Watch, and would be the 32nd-largest weighted stock in the S&P 100 Index (OEX.X).

With just 35 components in the Morgan Stanley High Tech 35 Index (MSH.X) and just 30 component in the AMEX Computer Technology Index (XCI.X), tomorrow's price action in HPQ could be an index mover.

Maybe that little spat of buying this afternoon that had the SOX.X briefly bidding into positive territory was some good old fashioned buying if "smart money" knew of HP's earnings.

AMEX Computer Tech (XCI) - 10-point box size

While the XCI tends to shadow the percentage moves in the Morgan Stanley High Tech 35 Index (MSH.X), the conventional 10-point box chart of the XCI.X provides a very good test for additional strength near-term. A "low pole warning" is similar to that discussed previously in the MSH (conventional 5-point box) where the test for strength is a trade at 720, which would unleash a triple top buy signal and break the bearish resistance trend.

There's an old point and figure saying that "the first test of bullish support trend can be painful for a bear" (see March 2003 trade at 470) and the same can be true that "the first test of bearish resistance can be painful for a bull."

Will bears defend the 720 level, or is the second leg of the bull market simply to powerful to deny?

From a risk/reward basis, you can be certain that bears will be trying to leverage off the 720 level with a stop so near. If they turn to cover at 720, that's where the power of a triple top buy signal is often found as demand (X) can build.

In early September (9), Dorsey/Wright and Associate's Computers Bullish % (BPCOMP) reversed up to "bull alert" status at 24% and remains bull alert at 46%. It would currently take a reading of 72% for this sector to achieve "bull confirmed" status. In February (2) of this year, this sector bullish % reversed lower to "bear alert" and in March (3) fell further to "bear confirmed" at 56%.

Here's a quick look at the XCI's bar chart with conventional retracement overlaid.

Computer Technology Index (XCI.X) - Daily Intervals

This week's WEEKLY R2 would line up nicely with that 720 level noted in the PnF chart as the big test for bulls to break through. Buyers seemed very eager to snap up "big tech" on that recent one-day dip to 50% retracement of 686.25 as if to say, "the gig is up!"

Applied Materials (NASDAQ:AMAT) $16.76 -0.11% quarterly earnings are slated for release tomorrow evening.

But let's not forget about tomorrow morning's weekly crude oil inventory report. I need to get you this week's Pivot Levels. In today's Market Monitor, (12:20 and 12:28 PM EST) I ran through the 30-minute interval chart as well as $1, $0.50 and $0.25 box size point and figure charts of the Continuous Crude Oil Contract ($WTIC).

While I (Jeff Bailey) am not ignoring, or being complacent about the October PPI data, let's realized that the Commerce Department noted that energy price gains were largely responsible for the PPI increase in October.

Here's a 30-minute interval chart of the December Crude Oil futures (cl04z) that we look at from time to time with QCharts' weekly pivot levels turned on.

December Crude Oil futures (cl04z) - 30-minute intervals

As time has passed and oil prices have fallen, the I want to make sure we're all alert that we're now nearing that bullish support trend on the $0.25-box chart of Stockcharts.com's $WTIC point and figure chart.

Now, the first sign of meaningful strength (demand) in the $0.25 box chart would be a trade at $48.25 at this point. With that said, it is notable that December Crude Futures (cl04z) haven't seen the light of day above a WEEKLY Pivot just over two weeks. Monday's low caught a bid at WEEKLY S2 $45.43, but a unison break of WEEKLY S2 and the $45.00 level should pave the way for a test of the current bearish vertical count.

Believe me. Traders and investors may have shrugged their shoulders at today's PPI data, fully knowing that oil prices have fallen from their October highs, but a resurgence in oil, especially much above $52 would most likely cap recent broader market equity gains in fast order.

Market Snapshot / Internals - 11/16/04 Close

The only comments I would have on today's internals is that there was stock hitting bids, BIG bids as the TRIN was on the rise pretty much throughout the session. At the mid-point of today's session I thought volume levels were "average" or slightly below what we've been seeing. I was surprised by the final tally at the NASDAQ where a rather quiet session finds 1.9 billion traded. It is that volume at the NASDAQ combined with rising TRIN suggesting to me that there were some big bids taking in some stocks on today's weakness.

Pivot Matrix -

In tonight's extended session, the QQQ after-hours highs comes at tomorrow's DAILY R1. Probably just a coincidence, but may hint that sellers will try and hold firm into tomorrow morning's 10:30 AM EST release of crude oil inventories, and at this point, why flinch with AMAT slated to release tomorrow, where there's some hope of a knee-jerk reaction lower on Thursday. Today's high on the QQQ came twice. Once early in the morning, then later in the afternoon. If bears do flinch and don't like what HPQ had to say, that $38.68 intra-day double topping action might find some buyers.

Tentative morning resistance in the SPX is present at DAILY Pivot and WEEKLY Pivot.

A quick check of the S&P Depository Receipts (AMEX:SPY) $117.88 -0.71% has last tick in tonight's extended session at $117.98, a couple of cents shy of its DAILY Pivot.

The QQQ did briefly penetrate its WEEKLY Pivot ($38.35) by 3 cents, but unless the market knows of anything "worse" at AMAT, which HPQ's quarterly earnings may have reversed, the QQQ should stay firm at or above WEEKLY Pivot in my opinion.

Jeff Bailey

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