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Monday - October 31, 2005

Market Musings

Friday's sharp advance sure took me by surprise. However, the Nasdaq lagged and this week is big with a Fed meeting on Tuesday and an employment report on Friday.

70% of the S&P 500 companies have reported earnings. Of those, 68% beat estimates. That may sound like a lot, but it is the historical average according to First Call Research. John Butters of First Call goes on to note that companies beat by an average of 2%. However, the long term average is 3.2% and the average over the last 8 quarters to 5%. I think it is clear that third quarter earnings were not that great and forward guidance was even less inspiring.

Look for the cable and media stocks to move this week with Time Warner, Comcast and Viacom reporting.

There sure is a lot of money on the sidelines and a lot of talk of the yearend rally. Maybe there is too much talk and expectation of this event.

The Wall Street Journal reports that presidential scandals are nothing new and usually don’t affect the stock market. I think that scandals make government ineffective and this reduces its influence. Less governmental interference is viewed as bullish.

The Dow Transports is hanging tough with a long white candlestick on Friday. A close above resistance at 3760 would be bullish.

The Nasdaq 100 formed a harami at 1550 support over the last two days. Friday's strong price action was surprising, but follow through is required to turn surprise into real strength.

The S&P 100 closed at its highest level since 4-Oct. Are we seeing some large-cap leadership. Look for a close above broken support at 557 for some confirmation.

The Dow Diamonds (DIA) formed a pennant over the last three weeks. Watch 104.5 up and 102 down.

The Consumer Discretionary SPDR (XLY) formed a harami over the last two days. Watch 32 up.

The B2B Internet HOLDRS (BHH) broke above resistance with a gap.

The Finance SPDR (XLF) broke resistance at 30 and is carrying this market higher.

The Retail HOLDRS (RTH) firmed at support. We have seen this before. Can it break resistance at 95?

PBY is pepping up with good volume in September. A break above 15 opens the door to 19.

MHP, the parent of Standard and Poor's, closed at a 52-week high.

PENN is bouncing off gap (Nov-04) support with three days of good volume the last two weeks.

CTX is finding support near its May breakout and a move above 66 would be bullish.

CBT held support at 31 and broke resistance at 33 with good volume.

CNXT gapped higher and a break above 2 would be bullish.

MKS is holding after the gap down and a break above 19 would be bullish.

JDSU continues to attract good upside volume.

Can SNPS break consolidation resistance at 19.6 and continue higher?

MCRS sure is strong.

CXW needs to break resistance at 40 to get out of jail.

By Arthur B. Hill - Mon 31-Oct-05 at 07:01AM in Market Musings
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Friday - October 28, 2005

Market Musings

Microsoft provided good numbers for the past and no-so-good numbers for the future. My comment: There is a lot a weak guidance going around. Either companies are managing guidance in an effort to beat expectations or there is serious concern ahead.

Coinstar (CSTR) is going to place its machines in 100 Wal-Marts. My Comment: Now there is a potential coup.

Bill Gross of Pimco thinks the Fed will cut rates in 2006. My comment: Is that why the Finance sector has been strong? Lower rates also means a slowing economy and this translates into lower revenues/profits.

The Wall Street Journal reports that program trading for the week ending 21-Oct was 55.7% of the NYSE.

Miers withdrew her nomination after the right wing of the republican party failed to offer support. My comment: Bush is damned if he does and damned if he doesn't. If he pleases the right wing of the party with his next choice, it will touch a nerve in the democratic party and this will lead to a fierce confirmation battle

After indecision on Tuesday (doji) and a failed rally on Wednesday (shooting star), the market has spoken with a weak open and weak close. My comment: The early October trend reversal is here to stay.

The Nasdaq and Nasdaq 100 are trading back below broken support (1550 and 2100 respectively). My comment: These two were the only indices to make it comfortably above broken support and their failure bodes ill for the overall market.

The Dow never even made it above last week's high and met resistance at 10450. My comment: The Dow is relatively weak.

The Dow Transports formed a shooting star, doji and long black candlestick over the last three days. My comment: This is a classic short-term reversal at resistance. Falling oil prices (lower costs) are unlikely to offset weakness in the economy (lower revenues).

The NYSE Composite, Russell 2000 ($RUT), S&P 100 and S&P 500 all failed at broken support. My comment: Yesterday's decline reinforces resistance and this week's highs are now the key levels to watch for a bullish revival.

The S&P 500 Volatility Index ($VIX) is testing long-term resistance around 16.5%. My Comment: A breakout would turn the long-term trend bullish for VIX and this would end a three year downtrend. Rising fear means falling stock prices.

The Consumer Discretionary SPDR (XLY) broke rising flag support and this signals a continuation lower.

The Consumer Staples SPDR (XLP) did not offer a safe haven as the stock gapped down and closed weak.

The Energy SPDR (XLE) failed to hold its breakout.

The Retail HOLDRS (RTH) gapped down and stayed down. My comment: The S&P 500 is not going far with this group leading the way lower.

The Semiconductor HOLDRS (SMH) closed at its lowest level since late May. My comment: The Nasdaq is not going far with this group leading the way lower.

The Software HOLDRS (SWH) formed a shooting star, gapped down and then formed a long black candlestick. This all comes near resistance and bodes ill. My comment: SWH was holding up the Nasdaq and this short-term reversal will weigh on the Nasdaq.

By Arthur B. Hill - Fri 28-Oct-05 at 06:05AM in Market Musings
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Thursday - October 27, 2005

Market Musings

If you don't think rates are moving higher, just look at the bond market. TLT gapped lower and the 10-year T-Note Yield is approaching its March high. The bond market is forecasting higher rates.

A slow down in defense spending hurt Boeing and this could trickle down to other defense contractors.

Adobe (ADBE) continues to rock with a forecast in the upper end of its range.

Rising input costs hurt earnings at Newmont (NEM). This theme continues to dominate the Materials sector. Mining shares have a lot more to worry about than just the price of gold.

Consumer Confidence hit two year low on Tuesday and this could trickle down into retail spending. The Retail HOLDRS (RTH) cannot hold the break above 94 and the Consumer Discretionary SPDR (XLY) formed a bearish rising flag.

David Fuller notes that Bush, like Reagan, is trying to grow our way out of the deficits and this will be inflationary. It is either inflate or die. Even though it may be difficult to accept, Bush's policy is easy to understand - especially when politicians are concerned.

Guru Investor John Reese notes that Western Digital (WDC) is storing up strength - see TheStreet.com. That may indeed be the case, but WDC at least needs to break above 12.3 to break the current fall.

James Altucher thinks that Six Flags (PKS) will benefit from a year old activist effort - see TheStreet.com

Richard Suttermier says that now is the time to rotate into techs - see TheStreet.com. You first Richard.

The Nasdaq 100 formed a harami cross on Mon-Tue and a hanging man on Wednesday.

The Dow Industrials cannot make it above 10450.

The HealthCare SPDR (XLV) broke support around 30.5 and remains one of the weakest sectors, if not THE weakest.

Buy on rumor and sell on news? Rising energy prices hit earnings in the Materials sector. However, the Materials SPDR (XLB) bounced over the last six days. This bounce follows a decline from early August to mid October.

The Information Technology SPDR (XLK) is running into resistance at broken support (20.5) with a bearish engulfing and shooting star.

The B2B Internet HOLDRS (BHH) is challenging resistance at 2.35 with good volume.

The Biotech HOLDRS (BBH) broke falling flag resistance with a gap and that gap is holding. Watch 183 for a big failure.

By Arthur B. Hill - Thu 27-Oct-05 at 06:03AM in Market Musings
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Wednesday - October 26, 2005

Market Musings

There were lots of doji (candlesticks that look like crosses or plus signs) yesterday and this shows indecision.

A number of indices and stocks are trading near resistance from broken support - the support breaks in early October turn into resistance.

The Nasdaq formed a potentially bearish harami cross over the last two days. Watch for a move below 2083 to confirm.

The Retail HOLDRS (RTH) is still having lots of trouble with resistance at 94.

The Regional Bank HOLDRS (RKH) is nearing resistance from the July trendline.

The Consumer Discretionary SPDR (XLY) formed a rising flag over the last two weeks.

The Energy SPDR (XLE) broke above falling wedge resistance at 48 with a gap.

James Stewart of SmartMoney notes that three companies are set to dominate the internet and are growth stocks of the decade - YHOO, EBAY and GOOG.

Amazon AMZN reported lower profits and a reduced outlook that hit the stock after hours. This is not a true internet titan, but more of a retailer.

Dupont DD is the latest company in the materials sector to report weak earnings and a reduced outlook.

Lexmark LXK showed that stocks can become oversold and remain oversold as the company warned yet again.

International Paper IP is the latest company to be hit by rising costs.

William Gabrielski of TheStreet.com considers Micron MU compelling after its chip deal with Intel.

CHIR continues to consolidate after its big gains and remains under accumulation.

SNWL surged above resistance with good volume.

PACT gapped higher and closed strong on good volume.

INTV consolidated over the last few months - watch 9.7 up and 8.2 down.

VRTY gapped up and closed strong with good volume.

MEOH moved higher over the last two days with good volume.

ODFL is leading the transports with a breakout on good volume.

ESL is breaking down on high volume.

JOSB remains in a triangle as downside volume outpaces upside volume.

DSPG is testing resistance at 26.5 and a breakout would be bullish.

By Arthur B. Hill - Wed 26-Oct-05 at 06:59AM in Market Musings
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Tuesday - October 25, 2005

Market Musings

The Dow Transports was the big winner with a whopping 100 point gain. This solidifies support around 3550.

The Nasdaq closed above broken support at 2100.

The Russell 2000 ($RUT) confirmed the bullish engulfing and harami from last week.

The S&P 100 surged, but remains below last week's high.

The S&P MidCap Index ($MID) advanced back to broken support at 695 (now resistance).

The S&P 500 is back at broken support (1200) and this area should act as resistance.

The S&P 500 Volatility Index ($VIX) turned lower after meeting resistance from a two year trendline.

The Internet Infrastructure HOLDRS (IIH) is moving higher on good volume and broke trendline resistance last week.

Cendant, a perennial dog, announced a breakout of the company and the stock closed sharply lower. Not a good reaction . Watch 21 for a change of heart.

Texas Instruments led the Semiconductor rally from April to Sept. However, the company's outlook was not positive and the stock is down sharply after hours. This will affect an already beleaguered Semiconductor group.

The Wall Street Journal reports that Wal-mart is losing the battle to control costs (employment, energy and interest rates). This theme just continues.

Wall Street cheered the appointment of Bernanke as the new fed chief. I have read numerous reports and these were all glowing.

"If You Don't Eat or Drive, Inflation's No Problem" - Daniel Gross of the NY Times.

AMAT broke support in September and consolidated in October. Watch 16.5 for a support break and continuation lower.

The Dow Transports was up strong, but CHRW closed down for the third day on high volume.

Cramer likes IR and it is trading near support. Careful, rising input prices could affect this stock.

DY is still firming around 20-21 and needs to break 21.30 to turn bullish.

CRS surged off support with big volume.

By Arthur B. Hill - Tue 25-Oct-05 at 07:05AM in Market Musings
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Monday - October 24, 2005

Market Musings

The Nasdaq formed a doji just below resistance from broken support at 2100. Let's see if the bulls can punch through 2100.

The Russell 2000 ($RUT) formed a rising flag over the last two weeks and a move below 619 would be bearish. Within the falling flag, a bullish engulfing and harami formed. A move above 640 would be bullish.

The Dow Diamonds (DIA) closed at its lowest level of the week.

The S&P Midcap ETF (MDY) formed a bullish engulfing (Tue-Wed) and then a harami (Thur-Fri). Watch for a break above 126 for follow through.

SPY formed a spinning top near support at 117. Watch 120 for a breakout.

Oil is testing support at 60 and a break could buoy stocks.

The Retail HOLDRS (RTH) tried once again to break above 94 and failed. Will the third time be lucky?

Schlumberger (SLB) reported sharply higher earnings and I am expecting more of this in the oil patch. However, the stock closed down.

Dan Luskin of SmartMoney likes Wal-mart over Exxon.

Rising cost hurt Caterpillar (CAT) earnings and this theme continues.

XRX reported good earnings and recovered from a support break with a high volume surge.

20/20 will air a show reporting that McDonalds and Starbucks served regular coffee when decaf was ordered. I am sure if you go into 100 coffees shops, there is a chance that 5-10% will make this mistake. However, it is not a conspiracy as 20/20 would have us believe.

JBL of TheStreet.com thinks Pfizer and Walmart are bargains. PFE looks like a falling know and just gets cheaper and cheaper.

Broadcom (BRCM) formed a massive outside reversal on high volume Friday.

Hewlett Packard (HPQ) formed a rising flag over the last two weeks - Watch support at 27 for a continuation lower.

Juniprer (JNPR) surged on big volume as certain networking stocks continue to show strength.

Novell (NOVL) continues to show good relative strength and upside volume has been outpacing downside volume the last few months.

Filenet (FILE) formed a triangle over the last few months and surged on Friday.

By Arthur B. Hill - Mon 24-Oct-05 at 11:05AM in Market Musings
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Friday - October 21, 2005

Market Musings

The Nasdaq 100 has a resistance/support/resistance battle raging around 1550 with touches in early June, mid June, late August and late September.

The NYSE Composite erased all of Wednesday's gains and them some by closing at its lowest level of the month and is leading the way lower.

The Russell 2000 ($RUT) formed a rising flag over the last six days.

The S&P 100 closed below Wednesday's open.

Needless to say, the VIX shot higher yesterday.

The Consumer Staples SPDR (XLP) has traded flat since March 2004.

The Industrials SPDR (XLI) looks poised to break support at 29.

The Materials SPDR (XLB) cannot get any lift and move back above broken support.

The interest rate sensitive Utility SPDR (XLU) closed at its lowest level since late May.

The Internet HOLDRS (HHH) does not have Google and met resistance at 63. This is the only Nasdaq group showing any strength and a break below 58.5 would be bearish.

The Regional Bank HOLDRS (RKH) is meeting resistance from broken support at 132-133.

The Retail HOLDRS (RTH) tried to close above 94 and failed.

The Semiconductor HOLDRS (SMH) remains below resistance at 35.

The Phila. Gold & Silver Index ($XAU) is nearing support (100) from broken resistance (Aug high) and the May trendline.

The StreetTracks Gold ETF (GLD) is near support from its late September low, but the gap two days ago is holding.

It is Jeckle and Hyde on Wall Street as a big up day is followed by a big down day.

Pfizer (PFE) warns of a long-term decline and this knocked the HealthCare sector.

Can Google (GOOG) power the WHOLE market?

Coca-Cola (KO) gapped higher on strong overseas sales, but still needs to clear 43.6 for a breakout.

More evidence of rising costs as McDonalds blamed higher beef prices for a dent in profits

Albertsons (ABS) is publicly on the auction block. The stock gapped higher on the news and has traded flat (23-26) the last 7 weeks.

Jim Jubak picks five tech stocks for the next rally (ARRS, EMC, KOMG, MRVL and ANAD). Let's wait for the rally to get here first though.

Arne Alsin of TheStreet.com projects a 13000-15000 Dow in 2-3 years. This may be the case, but how will it get there?

Mark Hulbert of CBSMarketWatch reports that Newsletter Sentiment dropped to -30.1%, its lowest level in six years. This contrarian indicator may bear fruit, but let's keep an eye on the charts for some REAL proof of a reversal.

The Conference Board reported that Leading Economic Indicators (LEI) dropped again in September with only 4 of the 10 components showing improvement.

EBAY's CEO notes that users will be able to make free telephone calls in a few short years. You can do it right now with Skype, which EBAY bought for $4 billion.

The Fed keeps jawboning rates higher, but the iShares ~20-year T-Bond Fund (TLT) has firmed over the last six days. Watch 92 for a breakout.

By Arthur B. Hill - Fri 21-Oct-05 at 09:22AM in Market Musings
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Thursday - October 20, 2005

Market Musings

Stocks opened weak and closed strong on good volume. The end result is a number of bullish engulfing patterns. OEX formed a big bullish engulfing below broken support. This broken support level now turns into resistance and a move above 557 would confirm the bullish engulfing. Without confirmation, this is a one-day wonder and part of a mere consolidation.

The Nasdaq 100 moved back above broken support with a long white candlestick.

The NYSE Composite finished at broken support and needs some follow through.

The Russell 2000 ($RUT) remains below broken support and is lagging.

Among the styles, growth outperformed value yesterday.

The Consumer Discretionary SPDR (XLY) formed a big bullish engulfing, but follow through is required for confirmation.

The Energy SPDR (XLE) has a falling wedge working the last few weeks and a move above 50 would be bullish.

The Finance SPDR (XLF) held Friday's gap and followed through with a big advance yesterday.

The B2B Internet HOLDRS (BHH) formed a big outside reversal and a move above 2.35 would be bullish.

The Internet HOLDRS (HHH) closed at its highest level since January and remains the strongest tech group. However, after hours weakness in EBAY could weigh.

The Semiconductor HOLDRS (SMH) opened weak and closed strong. However, the stock still finished in the minus column and this key group continues to lag.

The StreetTracks Gold ETF (GLD) formed a bearish island reversal over the last four days. Mind the last gap!

***Stocks***

Corrections Corp of America (CXW) has already recouped its October losses and looks poised to break resistance at 40.

Looks like a breakaway gap on high volume for PJC.

SEI Investments broke falling wedge resistance with a high volume surge.

Abbott Labs (ABT) is moving higher on good volume the last few weeks.

CCI gapped down and stayed down with above average volume on Wednesday.

XRX broke key support at 13 on good volume.

HSY gapped up on big volume and held the gap with another good move.

YUM is pushing resistance at 51 with above average volume.

AL broke the August trendline with a high volume advance in October.

By Arthur B. Hill - Thu 20-Oct-05 at 09:35AM in Market Musings
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Wednesday - October 19, 2005

Market Musings

***Overview***

There is lots of chatter about how oversold the market it. It is indeed, but the market is oversold and built to stay that way.

The inflation yo-yo is up and running. Led by the Finance sector, stocks surged on Friday as core CPI was benign.

Wholesale prices surged 1.9% - the largest gain since 1974. This led to weakness in stock as inflation fears were sparked.

Rising inflation means higher interest rates and higher interest rates mean a stronger dollar as investors are paid more to hold dollars.

Greenspan says that oil is taking its toll on the economy. Hmm…. A slowing economy + rising inflation = stagflation.

Despite a rising dollar, Citigroup is upping its targets for gold. It looks like the 70's all over again.

Even though producer prices jumped 1.9%, the iShares ~20-year T-Bond Fund (TLT) held firm and did not react negatively to the bad news.

In addition, the Phila. Gold & Silver Index ($XAU) and Gold declined.

Wilma is now a category 5 hurricane that is projected to hit the Florida tip and possibly run up the eastern seaboard.

***Indices, Sectors and Industry Groups***

The Dow Transports failed to hold the breakout and the Aug-Sep decline looks set to continue with 3400 the next target. These stocks cannot hold up even when oil prices are soft.

The Dow Diamonds (DIA) formed a bearish engulfing at broken support.

The S&P Midcap ETF (MDY) and S&P 500 Equal Weight Index (RSP) did not even make it back to broken support.

The Consumer Staples SPDR (XLP) formed a big harami over the last two days - watch 23.05 for confirmation

The Energy SPDR (XLE) gapped down to firm an island reversal.

The Industrials SPDR (XLI) looks poised to break support at 29.1

The Internet HOLDRS (HHH) formed a dark cloud pattern and failed near resistance.

Kraft (KFT) is the latest company to blame high commodity and energy prices for an earnings miss. Expect this trend to continue throughout earnings season.

The Oil Service HOLDRS (OIH) broke back below support at 110.

***Stocks***

Merrill Lynch downgraded Ford and GM to sell. Good timing!

JNJ's profits were up 12%. Companies don't get more solid than this Consumer Staple/HealthCare stock.

INTC reported good earnings, but guidance was weak. The song remains the same.

SHW formed a consolidation over the last few weeks and a break below 42.5 signals a continuation lower.

DRI formed a rising wedge the last few weeks and a break below 29.5 starts the move lower.

HTLD formed a head-and-shoulders over the last five months and a break below 18.9 would be bearish.

DY could not breakout.

UTX is testing neckline resistance at 49

SCHN retraced 62% of its Mar-May decline with a rising wedge and broke the lower trendline this month. .

GMR is sinking below support at 34.

By Arthur B. Hill - Wed 19-Oct-05 at 07:08AM in Market Musings
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Tuesday - October 18, 2005

Market Musings

Random Rants

***Indices, Sectors and Groups***

The bulls were able to hold Friday's gains and even add a few notches on Monday. This follow through is positive, but the rally still looks tentative.

The Dow Transports is testing its September low with a bullish engulfing on Friday.

The S&P MidCap Index ($MID) broke triple top support with the October decline. Look for this support break to turn into resistance on any bounce.

The Dow Diamonds (DIA) is already trading back at its support break - as is QQQQ.

The two day rally turned the S&P 500 Volatility Index ($VIX) back as it met resistance from the Sep-04 trendline. In addition, VIX is trading below its April high. A break above this high would be very bearish.

The Consumer Staples SPDR (XLP) got a big bounce off support and the short-term trend is bullish within a six month trading range.

The Energy SPDR (XLE) gapped up for form an island reversal over the last four days and confirm support at 47.

The Finance SPDR (XLF) formed a doji on Monday, but is still holding Friday's gap.

The B2B Internet HOLDRS (BHH) held support around 2.10 and gapped higher. Watch 2.35 for a breakout.

The Retail HOLDRS (RTH) did not follow up on last week's hammers with confidence and still needs to break 94 to turn bullish.

***Stocks***

Jim Jubak of MSNMoney picks 10 nimble players for the next oil rally (VLO, MRO, CHK, OXY, XTO, KWK, APA, NE, ESV and RIG)

I reported the breakout in IBM last week and the company reported good earnings and is up over 2% after hours.

William Gebrielski of TheStreet.com likes the low-priced International Displayworks (IDWK).

INTC, MOT and YHOO report earnings today. Grab your hat.

James Cramer likes Newell Rubbermaid (NWL). Judging from the gap and high volume advance, he is not alone.

TSM formed a falling wedge (Jul-Oct) and is testing its September low. A break above 8.65 would be bullish for the stock and the Semiconductor group.

INTC reports earnings today. Judging by the Jul-Oct decline, it is not going to be a good report. However, this is already priced into the stock.

EMC broke falling wedge (Jul-Sep) resistance with a surge in late Sept.

LU gapped up and held the gap on good volume. Watch 2.9 for a failure.

CSCO has a head-and-shoulders working from Feb to Oct and a break below 17 would be very bearish.

CIEN broke resistance at 2.35 in late Sept and this level is turning into support in mid October.

SYMC needs to break above 23.15 on good volume to fill the late July gap and reverse the downtrend.

CKFT surged in early Aug on high volume and formed a falling flag over the last two months. A break above 40 opens the door to new highs.

SGP gapped up four days ago and the gap is holding.

PFE gapped up four days ago and the gap is NOT holding.

GM gapped up from the mid 20s for the second time in six months. Lots of support at 25, but this stock is likely to be dead money for a while.

Can COCO break above 14 to turn the trading range into a solid base?

DCI recovered from a support break with a high volume surge in Sept and these gains are holding.

A stronger dollar is likely to hurt earnigns at MMM.

Cuts in defense spending could hit the big defense contracters

By Arthur B. Hill - Tue 18-Oct-05 at 07:24AM in Market Musings
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Friday - October 14, 2005

SPX from the TD Trader Daily Swing

On the daily chart, the triangle support break and move below 1200 rule the roost. The index has become oversold and shows signs of firmness with a doji yesterday. This could lead to an oversold bounce back to broken support around 1200-1210.

The 60 minute chart echoes the sentiments of the daily chart. The index declined over 60 points without a bounce and is ripe for a retracement or a consolidation. For potential upside targets, I am looking at broken support the normal retracements (38%, 50% and 62%). A 50% retracement of the October decline would extend to around 1203. In addition, there is support between 1200 and 1210 from the September lows. Together, these make for a resistance zone around 1200-1210 and I would expect a rally to fail in this area.

In the TD Trader Daily Swing commentary (click here), I have been short-term bearish since 5-Oct (1209 SPX)

By Arthur B. Hill - Fri 14-Oct-05 at 04:37AM in Indices
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NDX from the TD Trader Daily Swing

Led by a rebound in the Semiconductor HOLDRS (SMH), the Nasdaq 100 formed a bullish engulfing just above 1500. This bullish candlestick reversal requires confirmation and a close above 1550 would do the trick. A bullish engulfing marked the 29-Aug low (gray oval) and this was confirmed two days later with long white candlestick.

For what an unconfirmed bullish engulfing looks like, see the 22-Sep bullish engulfing in the Retail HOLDRS (RTH). A long white candlestick failed to follow and this pattern is still unconfirmed. There were attempts to rally, but RTH failed to close strong and above resistance at 94 in late September. Two hammers formed recently and 94 still holds the key.

On the 60 minute chart, the decline slowed around 1520 and the index bounced with an afternoon rally. After a 100 point decline without a bounce, the index is ripe for a retracement or a move back to broken support. A 50% retracement would extend to around 1570 and I see a broken support zone around 1550-1565. Together, these form a resistance zone around 1550-1570 and I would expect a rally to fail in this area.

In the TD Trader Daily Swing commentary (click here), I have been short-term bearish since 5-Oct (1589 NDX)

By Arthur B. Hill - Fri 14-Oct-05 at 04:36AM in Indices
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Thursday - October 13, 2005

Market Musings

RTH formed a bullish engulfing three weeks ago and a hammer yesterday. These show support, but RTH needs to break above 94 for this firmness to turn into enough buying pressure worthy of consideration for a trend reversal.

Bonds did not provide a safe haven as the iShares ~20-year T-Bond Fund (TLT) moved below its August low.

The S&P 500 Equal Weight Index (RSP) broke its Aug-04 trendline and June low. Even the small and mid-caps are getting hammered.

The Dow Utilities is entering a support zone around 390-400 from the July-August consolidation.

CNNMoney is running a story on the bright prospects for the Big 3 Auto Makers in 10 years time. 10 years? Who has 10 years to wait? Give me a break.

Prudential downgraded Intel. After the stock was already down 20% and AMD had risen from 15 to 25 (May to Sep). What took so long?

Despite two big down days in the Nasdaq, DY is holding firm and even managed a small gain with two days of above average volume.

Jon Markman of TheStreet.com thinks that Polaris's star has dimmed and lower prices are ahead.

By Arthur B. Hill - Thu 13-Oct-05 at 06:24AM in Market Musings
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Wednesday - October 12, 2005

Random Rants - aapl, n, jblu, pch, ibm and spy

Apple's profit quadrupled and the stock declined after hours. It was a classic case of buy on rumor and sell on news.

Inco is buying Falcobridge for $11 billion and this will create the world's largest nickle producer. Could this mark a peak in mining shares?

Potlatch (PCH), a paper products company, is the latest to issue an earnings warning due to rising energy cost. This theme will continue to play out.

IBM got an upgrade and a breakout at 82 on good volume.

While Delta (DAL) is cutting routes to save on fuel, Jetblue (JBLU) is increasing routes on the east coast. Watch 20 for a breakout in JBLU.

Strong starts and weak finishes are not bullish.

By Arthur B. Hill - Wed 12-Oct-05 at 05:35AM in Market Musings
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Tuesday - October 11, 2005

Random Musings

$TRAN, $NYA, CPS, HANS, SBUX and TJX

The Dow Transports is holding firm for now and I will be watching 3600 for a breakdown. As long as it holds, the breakout is valid and follow through towards 3830 is expected.

The NYSE Composite is holding its last August low and remains one of the new indices to do so.

CPS broke consolidation resistance, but on low volume.

James Cramer is touting TJX - so is Pru analyst Stacy Pak. The stock shows good upside volume and a breakout at 22.3 would be bullish.

Starbucks is selling chilled coffee in ready-made drinks (Seattle Latte and Milano Espresso) at convenience stores in Japan and Tawain. This could be a big winner.

HANS sure looks toppy.

By Arthur B. Hill - Tue 11-Oct-05 at 07:11AM in Market Musings
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Monday - October 10, 2005

Notable Stock Charts

While the market tanked last week, MICC held support at 18 and broke above the trendline extending down from early August with good volume.

XRX continues to hold firm with upside volume outpacing downside volume - watch 14.3 for a breakout.

IBM is also holding firm and showing some relative strength with good upside volume over the last few weeks = watch 82 for a breakout.

UIS, a real dog over the last few years, held firm over the last two weeks and upside volume has been outpacing downside volume since July. Is this turnaround for real?

LIOX is consolidating after the June gap.

JBHT broke resistance on Friday with good volume.

ENZN surged above 7 and consolidated the last three days - watch 7.8 for a breakout.

By Arthur B. Hill - Mon 10-Oct-05 at 07:40AM in Charts
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Friday - October 07, 2005

Random Rants

***Overview***

Thursday was the third day in a row of Fed anti-inflation jawboning.

There is now talk that the "much awaited" year-end rally may never come. One thing is for sure, a year-end rally will start with some kind of reversal and bullish catalyst. Yes, the market will ring some sort of bell when and if it wants to rally.

The Wall Street Journal reports that high energy prices are starting to eat into demand and this has put downward pressure on enegy prices. It is classic economics and the supply/demand curve.

Thursday was a big day for retailers as Wal-mart, Starbucks, Abercrombie & Fitch and Pacific Sunwear all reported good sales numbers. However, Talbots, Federated and Petsmart reported weak numbers.

Did you see that spike higher just before the close? That was probably shorts taking profits ahead of today's non-farm payroll report.

"The market has to rally significantly from here," or stocks will continue to decline, said Bill Strazzullo. You don’t say.

Jim Jubak of MSN reports that Wal-Mart is going to target higher-income shoppers and go after Target. This will include store upgrades. Personally, I do not find Wal-Mart a pleaseant shopping experience.

The Euro Index declined to support from its early July low and gapped up yesterday. Similarly, the US Dollar Index hit resistance and fell sharply

***Indices, Sectors and Industry Groups***

The Dow Transports held above its September low and the fall in oil prices may be putting a bid into these stocks.

The Dow Utilities suffered its largest three day decline since Nov-02.

The Nasdaq closed below key support at 2100.

However, the Nasdaq 100 is holding key support at 1550.

The NYSE Composite is testing key support from its August low.

The Consumer Discretionary SPDR (XLY) formed a doji near its September low and this shows indecision that could foreshadow a bounce.

The Finance SPDR (XLF) managed to firm at support.

The Retail HOLDRS (RTH) is firming, but can it clear 94 for at least a trendline breakout.

The Software HOLDRS (SWH) broke triangle support at 35.2.

The Transportation ETF (IYT) rose on good volume.

***Stocks***

IGT survived the three day carnage pretty well.

JBNT gained on good volume yesterday and sports a falling wedge over the last seven months.

JWN has consolidated the last three months with downside volume outpacing upside volume.

DG surged on good volume.

--------------------------------------------------------

By Arthur B. Hill - Fri 07-Oct-05 at 12:18PM in Market Musings
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Thursday - October 06, 2005

Support Breaks Abound

Stocks closed near their lows for the second day running as selling pressure remained intense. Finance led the way lower and the Dow Diamonds (DIA) broke support at 103.5 with a long black candlestick. This looks like a convincing support break.

By Arthur B. Hill - Thu 06-Oct-05 at 07:02AM in Indices
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OEX Breaks HS Support

The S&P 100 formed a head-and-shoulders pattern from June to September and broke neckline support at 557.

By Arthur B. Hill - Thu 06-Oct-05 at 07:01AM in Indices
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Big Support Bounce for Rates

Richard Suttmeier of TheStreet.com advises that the bond conundrum may be ending as the yield on the 30-year treasuries challenges its 200-day moving average. This monthly charts shows TYX challenging its 12-month SMA, but in a clear long-term downtrend. The current decline from 5.6% to 4.15% carried TYX to support and a big double bottom could be forming. An outside reversal formed at the end of July and further strength above the gray trendline extending down from May-04 would be bullish for yields (bearish for bonds). This would also fuel the inflation argument and be bullish for gold.

By Arthur B. Hill - Thu 06-Oct-05 at 07:01AM in Bonds
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Value in Microsoft ?

Fred Volgelstein of Fortune thinks Microsoft is a value play. The stock has been working its way higher the last few years and formed a massive rising wedge. As long as the wedge rises and key support at 23.8 holds, the bulls have the long-term edge. However, a break below 23.8 would be long-term bearish and call for a continuation of the prior decline (2002). This would also be bearish for software, the Nasdaq and the S&P 500. Google and Microsoft are clearly headed in different directions.

By Arthur B. Hill - Thu 06-Oct-05 at 07:00AM in Stocks
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YUM is Yummy In China

Chinese growth fueled a 16% profit surge at YUM Brands (KFC, Taco Bell, Pizza Hut). The stock gapped higher and closed higher with above average volume. However, the stock closed near the intraday low and succumbed to selling pressure. There is lots of support around 45-47 and a break above 51 would be bullish. I cannot remember the last time I went to Pizza Hut!

By Arthur B. Hill - Thu 06-Oct-05 at 06:59AM in Stocks
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Random Rants

***Overview***

James Cramer of TheStreet.com advises investors to "stay patient through this rough patch". Look at the charts Jim, the uptrends have reversed and it is October!

Jim Jubak of MSN likes trash stocks that will clean up after the hurricanes (WMI, AW, RSG, WCN and ROL).

The Institute for Supply Management (ISM) Services Index came in at 53.3. It is still above 50 and indicative of a growing economy, but the reading was well below the consensus 60 and at its lowest since 2003.

The prices paid component of the ISM Services Index rose to a record high 81.4 and this further fueled the inflation fire.

Katrina and Rita mean more government spending which also means more money sloshing around.

Oil declined below $63 and the Energy sector lost 3.4%.

Asian stocks followed Wall Street lower.

James Altucher of TheStreet.com notes that Consumer Staple Coca-Cola (KO) is still the real thing and offers some fizz.

Wendy's blamed hurricane and high gas prices for a profit slump.

Schnitzer Steel (SCHN) comes out with earnings today and steel companies have been hit by rising energy cost.

S&P adds Oneok and Pepsi to their top 10 list of favorite stock ideas.

***Indices, Sectors and Industry Groups***

The Dow broke the August and September lows that marked key support at 10350.

The Dow Transports failed to hold its breakout at 3670.

The Nasdaq is trading near suppport from its August and September lows (2100)

Selling was across the board as the NYSE Composite broke the May trendline and September low.

The S&P 500 formed a triangle from late June and broke support at 1200 with a long black candlestick.

The S&P SmallCap Index (SML) closed just above its August and September lows.

The S&P 500 Volatility Index ($VIX) broke out to its highest level since May.

The iShares REIT ETF (IYR) formed a continuation head-and-shoulders (9-Aug to 5-Oct) and a break below 62 opens to door to 55.

The iShares ~20-year T-Bond Fund (TLT) was about the only thing firm yesterday and investors moved to safety.

GLD continues its high level consolidation and shows no signs of weakness

By Arthur B. Hill - Thu 06-Oct-05 at 06:02AM in Market Musings
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Wednesday - October 05, 2005

Bearish Engulfing Patterns Abound

There were lots of bearish engulfing patterns and failures at resistance yesterday. Case in point: MDY formed a bearish engulfing at triple top resistance. A move below 127 confirms the triple top and reverses the uptrend.

By Arthur B. Hill - Wed 05-Oct-05 at 06:09AM in Indices
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Fed Sees Inflation

Dallas Fed President Richard Fisher indicated that inflation stands at the upper end of acceptable levels and this prompted fears of further rates hikes. This charts shows the iShares Lehman TIPS Bond Fund (TIP) relative to the iShares ~20-year T-Bond Fund (TLT). TIP is indexed to inflation and TLT is not. Inflationary fears are growing when TIP outperforms.

By Arthur B. Hill - Wed 05-Oct-05 at 06:08AM in Economy
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Earnings Season Approaches

The market is also concerned about upcoming third quarter earnings. And rightfully so. Expectations are pretty good as many indices are trading near their highs for the year.

By Arthur B. Hill - Wed 05-Oct-05 at 06:07AM in Indices
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Hardware Upgrade and 52-week Lows

Goldman Sachs upgraded the hardware group (EMC and IBM) and Lexmark slashed its earnings outlook by 50%. LXK fell sharply and joins DELL on the 52-week low list. I wonder how long HPQ can hold out.

By Arthur B. Hill - Wed 05-Oct-05 at 06:07AM in Stocks
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Healthcare Provides a Bright Spot

Seven of the top ten stocks in the HealthCare SPDR (XLV) were up on the day with ABT, WYE and LLY leading the way.

By Arthur B. Hill - Wed 05-Oct-05 at 06:06AM in Sectors
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Sun Sees the Light

SUNW shot higher on news of a partnership with Google to promote OpenOffice. This is the only competition to Microsoft Office. In addition, Google also notes that we do not need Windows to see the future. Google is red hot and MSFT is not. Look out.

By Arthur B. Hill - Wed 05-Oct-05 at 06:05AM in Stocks
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Random Rants

***Indices, Sectors and Industry Groups***

The Dow formed a rising flag over the last two weeks and a move below 10400 would confirm this bearish pattern.

The Dow Utilities formed a bearish engulfing as concerned about rising interest rates starts to hit.

The Nasdaq failed at the August trendline and appears to be forming a lower high.

The Russell 2000 has a descending triangle working over the last two months and a rising flag over the last two weeks.

The S&P 100 ETF (OEF) may be the first to break its August lows.

The S&P Midcap ETF (MDY) formed a bearish engulfing at triple top resistance.

The S&P 500 Volatility Index ($VIX) formed higher lows over the last three months and moved higher Tuesday.

The Consumer Discretionary SPDR (XLY) formed a pennant over the last two weeks.

The Energy SPDR (XLE) declined 3% with a gap and long black candlestick. This is a warning shot, but not enough for a trend change.

The Finance SPDR (XLF) formed a long black candlestick and a support break at 29 looks imminent.

The Materials SPDR (XLB) formed a bearish rising flag over the last two weeks.

The Information Technology SPDR (XLK) failed to break the August trendline and remains in a falling price channel.

The Internet HOLDRS (HHH) formed a bearish engulfing.

The Semiconductor HOLDRS (SMH) formed a long white candlestick, gravestone doji and long black candlestick - this makes for an evening doji star and a bearish candlestick reversal at resistance.

***Stocks***

WY has a big head-and-shoulders that extends to the January low with neckline support around 61.

SUNW shot higher on news of a partnership with Google to promote OpenOffice.

DYN moved above its September high with above average volume the last two days.

AMAT formed a triangle in August and broke lower trendline support two weeks ago and still looks weak.

TARO is coming to life

NSTK broke consolidation resistance

APPX is testing consolidation resistance.

Can KMX hold that gap?

JWN formed an outside reversal and downside volume has been outpacing upside volume since early August.

BZH filled Monday's gap.

FSS turns bearish on a break below 16.4.

Can DY hold the island reversal?

UTX has a large head-and-shoulders that extends back to January.

NUE broke the trendline extending up from late June.

By Arthur B. Hill - Wed 05-Oct-05 at 05:09AM in Market Musings
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Tuesday - October 04, 2005

Lockheed Looking Toppy

Lockheed Martin (LMT) formed a large head-and-shoulders this year. There is a neckline, but I prefer the support zone around 48.5-49.5. The head-and-shoulders is not confirmed as long as 48.5 holds and the uptrend remains in play. A move below would break the uptrend and confirm this big bad bearish reversal pattern.

By Arthur B. Hill - Tue 04-Oct-05 at 11:55AM in Stocks
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ELY Drives Higher

Callaway Golf (ELY) advanced to 15 in late June and then consolidated the next three months. The stock found support at 14 and you know the drill by now. The gap and high volume surge off support solidify support and argue for a continuation higher. A move below 14 and all bullish bets are off.

By Arthur B. Hill - Tue 04-Oct-05 at 11:55AM in Stocks
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CHIC Gaps Off Support

Charlotte Russe HLDG (CHIC) surged above resistance in July and this resistance turned into support. The stock tested support in August and September. Monday’s gap and surge above resistance solidifies support and calls for a continuation of the prior advance.

By Arthur B. Hill - Tue 04-Oct-05 at 11:54AM in Stocks
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Kemet Breaking Out

Kemet (KEM) surged in late July with gap and held the gap throughout August and September. The stock move above resistance at 8.5 on Monday with above average volume and this signals a continuation of the prior advance.

By Arthur B. Hill - Tue 04-Oct-05 at 11:54AM in Stocks
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Random Rants

***Overview***

The Institute for Supply Management (ISM) reported that its manufacturing index jumped to 59.4 in September from 53.6 in August. Anything above 50 shows expansion and this jump to 59.4 shows strength in manufacturing.

Strong economic numbers and federal spending from Katrina/Rita will keep upward pressure on interest rates.

With ISM strong, inflation remains a bigger concern than economic growth for the Fed.

Thursday is a big day for retail as a number of companies report same store sales.

Asia is getting a boost from a rising dollar - this make their exports cheaper.

Jim Jubak of MSN likes five techs under $5 - LU, JDSU, VTSS, CNXT and ANAD

The Lowrisk.com Dow survey showed 64% bearish and 15% bullish. This suggests that sentiment is overtly bearish.

***Indices, Sectors and Industry Groups***

The Dow Utilities is not afraid of rising rates and moved to yet another new high.

The Nasdaq traded up to the trendline extending down from early August and turned indecisive yesterday.

There were lots of doji out there on Monday as stocks turned indecisive.

The S&P Midcap ETF (MDY) is testing resistance from its August and September highs.

The Finance SPDR (XLF) came under pressure as interest rates moved higher.

The HealthCare SPDR (XLV) is firming at support - watch 31.7 for a breakout.

The Industrials SPDR (XLI) formed a bearish engulfing just below resistance from the Aug-Sep highs.

The Internet Architecture HOLDRS (IAH) showed some strength yesterday and is testing resistance from its Sepember high.

The Retail HOLDRS (RTH) needs to close above 95 to break the trendline extending down from early August.

The Semiconductor HOLDRS (SMH) formed a gravestone doji just below resistance at 38

***Stocks***

MLNM is holding the June gap and bounced off support with good volume.

HGSI shows lots of upside volume in September.

CRA shows good upside volume for September and broke consolidation resistance on Monday.

MDCC bounced on big volume and this solidifies support just below 20.

CHIC surged above consolidation resistance with good volume.

SCHL shows good relative strength over the last two months and upside volume has been strong the last three weeks.

IGT is firming around 26. And a break above the September high would be bullish.

ELY gapped up in June, consolidation the next three months and gapped higher on Friday with good volume.

X looks mighty weak.

By Arthur B. Hill - Tue 04-Oct-05 at 06:55AM in Market Musings
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Monday - October 03, 2005

SBC Forms Another Bullish Engulfing

SBC formed a bullish engulfing at support on above average volume.

By Arthur B. Hill - Mon 03-Oct-05 at 06:45AM in Stocks
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Jabil Surges Back Above Resistance

JBL surged back above resistance with high volume.

By Arthur B. Hill - Mon 03-Oct-05 at 06:44AM in Stocks
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X Cannot Fill Gap

X cannot fill the 20-Sep gap and cannot hold gains.

By Arthur B. Hill - Mon 03-Oct-05 at 06:44AM in Stocks
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EW Scripts Showing Good Upside Volume

SSP shows good upside volume in Sept and a break above 51.2 would be bullish.

By Arthur B. Hill - Mon 03-Oct-05 at 06:43AM in Stocks
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OATS Turning It Up

OATS formed a falling flag over the last two months and surged on big volume Friday.

By Arthur B. Hill - Mon 03-Oct-05 at 06:43AM in Stocks
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Random Rants

The Nasdaq formed a falling wedge (Aug-Sep) that retraced 38% of the prior advance and bounced off broken resistance at 2100.

In contrast, the Nasdaq 100 has a descending triangle working with the lower high in September and equal lows in Aug-Sept. A move below 1550 would confirm this bearish pattern.

Once again, the NYSE Composite is close to an all time high.

The S&P 500 has a triangle consolidation working since late June.

With a big move on Thursday, the Dow Diamonds (DIA) filled the 21-Sep gap and solidified key support.

The Nasdaq 100 Volatility Index (VXN) dropped sharply on Friday.

The Consumer Discretionary SPDR (XLY) is getting some support, but the downtrend dominates as long as the August trendline holds.

The HealthCare SPDR (XLV) is firming at support. Watch 31.7 for a breakout.

The B2B Internet HOLDRS (BHH) formed a triangle over the last two months - watch 2.35 for a breakout.

The Regional Bank HOLDRS (RKH) formed a harami over the last two days and a break above 132.5 would be short-term bullish for the group and the Finance sector.

The iShares REIT ETF (IYR) formed a bullish engulfing at support and surged on Friday.

The Semiconductor HOLDRS (SMH) followed through with a break above minor resistance and this is a positive within the larger falling price channel that extends back to early August.

The Telecom HOLDRS (TTH) got another boost on Friday - this follows the bullish engulfing on Wed-Thu.

The iShares ~20-year T-Bond Fund (TLT) cannot hold any gains and a break below 92 would be bearish.

The Phila. Gold & Silver Index ($XAU) formed a dark cloud over the last two days.

Dan Luskin of SmartMoney.com thinks Greenspan will keep raising rates to tame the inflation that threatens his legacy.

Procter & Gamble is surging to new highs as the acquistion of Gillette is completed.

Will Ebay's $2.6 billion acquisition of Skype pay off? Check out Heard on the Street at wsj.com

Housing prices: The latest data showed a 13.5% rise in the first half of the year. This is the highest rate of housing price inflation for more than 25 years.

Joseph Wana of TheStreet.com likes Paychex (PAYX).

The folks at S&P replaced Gillette with home builder Lennar (LEN). Interestingly, Google was not selected and is not a part of the S&P 500.

RDA has support at 15 and is showing some good upside volume the last few weeks.

IMAX gapped up on good volume last week.

AW has lots of support around 7.5 - 8

COCO continues to consolidate around 12.5 - 13

MAGS continues to consolidate with resistance at 11.5 and support at 10

NOVL continues to show good relative strength and good upside volume.

CHKP broke resistance at 24.1 on above average volume.

INTU formed a piercing pattern and a break above 46 would be bullish.

BUD sank to a new 52-week low.

SNPS continues to hold the mid August gap and consolidate near resistance. A break above 19.1 would be bullish.

MDCO surged off support with good volume over the last two days.

KFT filled its gaps with a big bounce higher.

DLP got a big bounce off support.

The Motel Fool likes AMX.

ZNT looks in trouble with a gap in early August and another on Friday.

By Arthur B. Hill - Mon 03-Oct-05 at 06:26AM in General
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