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Index Wrap

Mixed platter of leftovers

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It was an up, then down, then up and back down again type of session as traders returned from an extended Thanksgiving holiday to find an equity market mixed with mostly fractional gains and losses.

Energy commodities also finished mixed after Wednesday's holiday closure. The sharp rise in natural gas prices on Wednesday, which traders attributed to December expiration, saw quick retreat on Monday. January Natural Gas futures (ng05f) fell 80 cent, or 9.2%, to $7.837 after surging more than 17% on Wednesday.

January Crude Oil futures (cl05f) rose 32 cents, or 0.65% to $49.76, where a choppy $1.10 range kept traders on their toes.

U.S. Market Watch - 11/29/04 Close

While Friday's session was just a 1/2-day of trade, we've now completed 19.5, say 20-sessions of trade for the month of November. The small caps of the Russell 2000 Index (RUT.X) 634.46 +0.52% have been outperforming the major indices, while the drug and biotech sectors have been lagging broader gains for the sectors as the month of November draws to a close.

Early tallies from Black Friday retail sales were atop today's list of most heavily analyzed.

Discount retailing giant Wal-Mart (NYSE:WMT) $53.15 -3.92% was a drag on the Dow Industrials (INDU) 10,475.90 -0.44% from the opening bell, as well as the S&P Retail Index (RLX.X) 457.06 and Retail HOLDRs (AMEX:RTH) $98.15 -1.97%. The company's strategy to cut back on pre-Thanksgiving holiday ads, and offer fewer sales on items didn't pan out the way the company had expected.

Many retailers reported strong post-Thanksgiving sales trends and after a +7% gain added to August-September rebound, traders attributed today's selling to profit taking in the sector.

The nations leading automotive aftermarket parts and service chain, Pep Boys (NYSE:PBY) $16.12 +8.55% jumped higher after the company announced it had commenced a cash tender offer for any and all of its $100 million aggregate principal amount 7% Notes due in 2005.

In Monday's extended session, shares of Hot Topic (NASDAQ:HOTT) $18.84 -5.35%, which fell $1.07 during the regular session, fell to $17.23, a shellacking not unlike that of a pair of black PVC pants, after the teen-wear retailer said same-store sales dropped 8% in November.

Weakness in the dollar spawned fears that foreign central banks will reduce purchases of, or even turn to selling U.S. debt. Pimco's Bill Gross, one of the Street's most respected bond analysts, reiterated his belief that continued weakness in the dollar would have foreign investors shunning Treasuries.

The rise in both the 10-year yield ($TNX.X) and 30-year yield ($TYX.X) weighed on the mortgage-rate sensitive homebuilders, with the Dow Jones Home Construction Index (DJUSHB) 686.65 -3.10% leading today's list of sector losers.

Market Snapshot / Internals - 11/29/04 Close

By 11:00, volumes at both the NYSE and NASDAQ had easily exceeded Friday's trade-shortened session, where sellers seemed rather eager to harvest early gains. On Wednesday, the NYSE 5-day NH/NL ratio moved back above its more intermediate-term 10-day NH/NL ratio, and the NASDAQ's 5-day NH/NL ratio followed on Thursday.

A buy program premium at 02:25 PM EST had the major indices lifting back near their morning highs where a notable increase in new highs unfolded, but two sell program premiums at 03:20 PM EST and 03:45 PM EST kept the major indices relatively unchanged by the close.

While the U.S. Dollar Index (dx00y) 81.96 +0.22% shows a gain in Monday's trade, that comes after a new multi-year low in Sunday's session. Gold futures closed above $453 an ounce for the first time since July 1988.

Meanwhile the AMEX Gold Bugs Index ($HUI.X) 242.93 -0.18% finished relatively unchanged, but well off its December 2003 high of 258.60.

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

Today's lows found buyers firm at the WEEKLY S1 and correlative MONTHLY R2. After tomorrow's trade, we'll get new MONTHLY Pivot level correlations, but the WEEKLY S1 and MONTLY R2 would be the most-likely level of institutional support. The upper-end of this week's range most likely be marked by the overlapping WEEKLY R1 and 1,190.62 WEEKLY retracement level.

Based on today's closing value for the SPX, and monthly high of 1,188.46 and low of 1,127.53, December MONTHLY Pivot levels would be 1,103.92, 1,141.25, Piv= 1,165.85, 1,202.18 and 1,225.78.

Before tomorrow's opening bell, preliminary third-quarter GDP figures will be released and economists expect little revision to the advanced 3.7% estimate given on October 29, when the SPX closed at 1,130.20.

NASDAQ-100 Tracker (QQQ) Chart - Daily Intervals

The NASDAQ-100 Tracker (AMEX:QQQ) $39.20 -0.01% lurched to a new multi-year high earlier this morning, but buyers seemed hesitant to overindulge in a Thanksgiving second-helping at WEEKLY R1, but instead tightened their profit taking belts just after the open.

Tomorrow is the last day the NASDQ-100 Tracker will trade primarily at the AMEX, as on December 1, the Qs move over to the NASDAQ with they symbol QQQQ.

Apple Computer (NASDAQ:AAPL) $68.44 +6.02% has been a key driver for the Qs as has Microsoft (NASDAQ:MSFT) $26.77 +0.63%, which recently distributed a heft $3.00 per share dividend to shareholders.

Pivot Matrix -

Bonds and banks will be an item of focus for me this week. I (Jeff Bailey) am not overly concerned about dollar weakness by itself, but the impact that dollar weakness has on the Treasury market, specifically bond trader's mentality.

On November 17, in our 03:15 PM EST update, I noted some bond trader talk that a large EuroZone hedge fund was said to be covering an extreme position in the bund/10-year spread, whereby that hedge fund was reportedly calling it quits and aggressively buying Treasuries (thus a lower yield that day) and other traders jumped onto that short-term momentum. Here we are, just less than two-week later and that short in the 10-year would begin providing some reward for that hedge fund.

I think equity bulls WANTED to see a higher yield in Treasuries, which in my opinion reflects an EXPANDING economy. However, as I've noted time and again, it is the RATE OF CHANGE that can "shock" equity traders and turn them into sellers if a RATE of CHANGE is too fast!

For further broader market equity bullishness, keep an eye on the BIX.X. Banks were squawking that the recent decline in 10-year yield was starting to pressure loan spread margins. Now we're getting some higher yield, which should help widen the spread and benefit the banks. The BIX.X hasn't been "leading in the pivot matrix" for a couple of weeks now, the SPX and OEX have been somewhat sideways the past two weeks.

Jeff Bailey

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