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Tuesday - February 28, 2006

Microsoft Leads Nasdaq Bounce

The Nasdaq caught a bid yesterday and Software stocks led the way higher. MSFT still has a $279 billion market cap and is plenty big enough to move the Software HOLDRS (SWH), Nasdaq and Nasdaq 100. The stock broke triangle resistance yesterday, but volume was low. This is a negative, but the breakout is positive until proven otherwise. I will be watching yesterday’s gap and the February lows for a complete failure. A break below 26 would be bearish for the stock, software and the Nasdaq. You can also see that the pattern over the last two months looks like a head-and-shoulders. It is out of place for such a reversal pattern, but a break below 26 would be bearish all the same.

By Arthur B. Hill - Tue 28-Feb-06 at 06:40AM in Stocks
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Wal-mart Stays Home

The Retail HOLDRS (RTH) surged yesterday, but Wal-Mart was not swayed and remains below resistance. LOW and HD led the way higher for RTH and this is quite positive. However, WMT is still the king of retail and this group is not going far without help from the big cheese. The long-term trend is down and WMT has consolidated over the last two months (gray oval). A break above 47 would be bullish for the stock, the retail group, the Consumer Discretionary sector and the S&P 500. Yes, WMT holds a lot of clout. Failure to break 47 and a move below 44.5 signals a continuation lower and this would adversely affect the S&P 500 et al.

By Arthur B. Hill - Tue 28-Feb-06 at 06:40AM in Stocks
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Sandisk Helps Out Semis

The Semiconductors have been lagging the Nasdaq, but Sandisk SNDK is trying to change that. The long-term trend is up, but the stock corrected sharply in Jan-Feb. A bullish engulfing formed on above average volume last week and the stock gapped higher yesterday. The gap held and the stock closed above 60 on the highest volume of the month. Not bad and this falling wedge breakout is bullish as long as the gap and February low hold. Careful, this is one volatile bugger.

By Arthur B. Hill - Tue 28-Feb-06 at 06:39AM in Stocks
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Monday - February 27, 2006

Industrials, Finance and the Dow Diamonds

The Wall Street Journal Reports:

Financial stocks -- not energy stocks -- dominate the Standard & Poor's 500-stock index. Banks, stock brokers, insurance companies and the like make up 21% of the index's market value. Technology is next, followed by drug and other health-related stocks, according to data compiled by Birinyi Associates in Westport, Conn. Energy stocks, for all their gains, come in sixth, with 9%. And that is good news for the stock market, because financial stocks have longer coattails. When oil stocks are dominant, as they were in the 1970s, it is because oil prices are so high that other parts of the economy suffer. When financials are strong, it is because inflation and interest rates are low. That is great news for banks and insurance companies because it holds down their cost of obtaining funds. And low interest rates hold down costs and boost profits at most other companies, too. That is why investors love to see financials lead the market.

This chart shows the Finance SPDR (XLF) breaking diamond resistance over the last two weeks and the breakout is bullish until proven otherwise. The Finance sector is not only important for the S&P 500, but it also plays a key role in the Dow Industrials. AIG, AXP, C and JPM are key components in the Dow and the Finance SPDR (XLF).

In addition to XLF, the Industrials SPDR (XLI) broke diamond resistance this month.

Looking at the Dow Diamonds (DIA) pattern, it is clear that the Industrials and Finance sectors are quite important to the Dow. All three have similar patterns (diamond breakouts). The Finance and Industrials sectors should be watched closely for clues on Dow direction.

By Arthur B. Hill - Mon 27-Feb-06 at 07:09AM in Sectors
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Friday - February 24, 2006

OEX Head-and-shoulders Still Around

There it is again. The S&P 100 surged in November and consolidated the last three months. The pattern looks like a head-and-shoulders reversal, but it has yet to be confirmed. A move below neckline support would confirm this bearish reversal pattern and reverse the medium-term uptrend. Yes, I still consider the medium-term up. Even thought the index has been flat the last three months, the November surge sets the bullish tone and this consolidation is merely a rest. Up + Flat = Bullish until proven otherwise.

By Arthur B. Hill - Fri 24-Feb-06 at 05:33AM in Indices
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Microsoft Still a Nasdaq Gorilla

Whatever your opinion Microsoft as a technology company (cutting edge or behind the curve), it is still mega cap with a large influence on the Nasdaq. The stock gapped up in late January, but that gap has been filled with a sharp decline. I find this quite negative and it reinforces long-term resistance at 28.5. The stock formed a pennant over the last two weeks and I am watching 26-27 for the next signal. A move above 27 would be bullish, while a move below 26 bearish. The direction of the break will influence the Nasdaq.

By Arthur B. Hill - Fri 24-Feb-06 at 05:33AM in Stocks
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GE Gaps Lower

GE is to the S&P 500 what Microsoft is to the Nasdaq. The stock rebounded over the last few weeks with a rising wedge advance. The move retraced 38% of the prior decline and stall just below 34. The hanging man candlesticks formed last week (gray circle) and the stock gapped down this week. Further weakness below 33 would get the decline back on track and this would weigh on the S&P 500.

By Arthur B. Hill - Fri 24-Feb-06 at 05:32AM in Stocks
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Thursday - February 23, 2006

Nasdaq Volume Just Average

The Nasdaq had a pretty good rebound on price, but volume was just average and did not exceed the 2 billion share mark. We still need to see more with a breakout above 2300 and higher volume.

By Arthur B. Hill - Thu 23-Feb-06 at 06:34AM in Indices
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NYSE Composite Closes at New High

The NYSE Composite closed at a new all time high yesterday. The surge over the last six days is third surge of the year (gray ovals) and this keeps the medium-term uptrend in tact. There is one small problem brewing though. NYSE volume has been declining since late January (blue line) and yesterday’s volume was barely above average. This is a warning, but the index would not turn bearish unless it breaks 7900 support.

By Arthur B. Hill - Thu 23-Feb-06 at 06:33AM in Indices
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Rates Gap Down

No matter what the market goes, the market commentators can always find a reason. Yesterday’s excuses du jour were falling oil prices and falling yields. Never mind that falling oil prices may reflect weakening demand and hence a slowing economy. Falling rates also reflect less economic strength as the Fed raises rates when the economy is strong and lowers rates when the economy is weak.

On the chart, the 10-year T-Note Yield gapped down three days ago and continued lower yesterday. This is short-term negative, but not enough to reverse the Jan-Feb surge. For that, rates need to move below 4.5% (45 on the chart). This would be most bearish for rates and bullish for bonds. My guess is that such a move would be accompanied by lower stock prices.

By Arthur B. Hill - Thu 23-Feb-06 at 06:32AM in Bonds
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Wednesday - February 22, 2006

How Far Without Intel?

Stocks surged last week and the Nasdaq was on the verge of a breakout. However, a gap down in Intel drug the Semiconductors and Nasdaqs through the mud the last two days. Intel had a surge and breakout in early January, but this failed to hold and the stock gapped down on 18-Jan. Upside volume was low on the breakout and this warned of the failure. The stock is trading in the low 20’s and gapped down again last Friday. As long as this gap and resistance at 22 holds, the Semiconductors will be under pressure and this will put a lid on any Nasdaq gains.

By Arthur B. Hill - Wed 22-Feb-06 at 12:07PM in Stocks
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Nasdaq Hits Trendline Resistance

After surging last week, the Nasdaq was promptly deflated with selling pressure on Tuesday. The decline formed a reaction high just below 2300 and keeps the falling wedge in place. This is a bullish consolidation, but the index must break above last week’s high to confirm this pattern and call for a continuation of the November or January advance.

By Arthur B. Hill - Wed 22-Feb-06 at 12:07PM in Technology
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Apple Holding Relatively Strong

Despite Tuesday’s decline, Apple held relatively strong and the breakout is holding. The stock broke falling price channel resistance with a surge above 70. In contrast to the Nasdaq 100, Apple is still above last Wednesday’s low. I will be watching this stock for clues on Technology in general. Apple is a leader and it is important that this stock hold above 67. A move below 67 would make for a failed breakout and weigh on the Naz.

By Arthur B. Hill - Wed 22-Feb-06 at 12:06PM in Stocks
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Google Fills Gap

Google is the other tech leader to watch. The stock gapped down on 13-Feb, formed three doji and then surged with a long white candlestick. The move filled the gap and set support at 340 (give or take $100). The stock consolidated over the last two days the next move is important. A break above 380 would be bullish for all concerned, while a move below 360 would be negative.

By Arthur B. Hill - Wed 22-Feb-06 at 12:05PM in Stocks
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Tuesday - February 21, 2006

Russell 2000 Flag Breakout

The Russell 2000 ($RUT) is not far behind as the index broke falling flag resistance last week. The big trend is clearly up and this latest breakout simply signals a continuation higher. I am watching the mid January low and October trendline for signs of trouble.

By Arthur B. Hill - Tue 21-Feb-06 at 07:27AM in Indices
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Dow: Diamond or a Broadening formation?

There were some mighty big breakouts last week. The Dow led the pack with a diamond breakout a week ago Tuesday. This breakout is holding and there is no reason to doubt it as long as broken resistance at 10900 holds. The bears out there will not doubt see a broadening formation evolving (gray trendline extensions). This may indeed be the case. However, it is not a threat as long as 10900 holds.

By Arthur B. Hill - Tue 21-Feb-06 at 07:27AM in Indices
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Thursday - February 16, 2006

Finance SPDR (XLF) Breaks Diamond Pattern

Just like the Dow a few days ago, the Finance SPDR (XLF) broke above the upper trendline of a diamond formation. This is a bullish development, provided it holds. Should the breakout not hold, look for a move below the February low to turn this big sector bearish.

By Arthur B. Hill - Thu 16-Feb-06 at 06:05AM in Sectors
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Consumer Discretionary SPDR (XLY) Surges off Support

I am also seeing leadership in the Consumer Discretionary SPDR (XLY). The stock held support around 32.8 and moved above its late January high with a surge over the last six days. Retail stocks feature prominently in this sector and the breakout is positive. The larger rising wedge still looms as potential trouble, but not unless XLY breaks below its February low.

By Arthur B. Hill - Thu 16-Feb-06 at 06:04AM in Sectors
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Goldman Warns

From Gregory Zuckerman of the Wall Street Journal:

***Hold on Tight: Cuts in Profit Estimates Loom*** It is unusual for a major investment firm to urge investors to steer clear of a big stock. It is even more unusual for a firm to tell investors to avoid 30 such companies. But that is what analysts at Wall Street's Goldman Sachs Group Inc. are saying about a slew of companies, including Broadcom Corp., MedImmune Inc., Agere Systems Inc., Marsh & McLennan Cos., Janus Capital Group Inc., Salesforce.com Inc., and Emmis Communications Corp. The worry: Over the next few months, analysts will be slashing earnings estimates for all these companies as employee stock options begin to be counted as an expenses.

Jee, what do you think would happen to Broadcom (BRCM) on an estimate trim? There is consolidation support just below 60 and trendline support around 50.

By Arthur B. Hill - Thu 16-Feb-06 at 06:04AM in Stocks
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Amazon Takes on Apple

CBS MarketWatch Reports: Amazon to challenge Apple. Online retailer plans music service, possibly players to fight for share of digital music market.

The online music space is getting awfully crowded. However, Amazon looks like a natural fit for online music. The company has a big customer base and the online channels already in place. This is not a make or break offering, but will surely enhance Amazon’s offerings. On the price chart, AMZN fell sharply and then consolidated just above support. The stock broke above the consolidation high yesterday and this is short-term bullish.

By Arthur B. Hill - Thu 16-Feb-06 at 06:03AM in Technology
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Tysabri and Biogen Coming Back

CBS MarketWatch Reports: Tysabri OK'd for MS patients. Biogen Idec and Elan can begin giving their pulled drug to some patients.

BIIB is still some 20 points below the levels it held before Tysabri problems appeared in February 2005. Recent price action is positive. The stock corrected with a falling wedge over the last few weeks and firmed over the last four days. The break above 45 is positive and further strength with a close above 46 would signal a continuation of the Oct-Dec run.

By Arthur B. Hill - Thu 16-Feb-06 at 06:02AM in Stocks
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Wednesday - February 15, 2006

Nasdaq Laggeth

The Nasdaq is lagging. While the Dow and Dow Transports surge higher, the Nasdaq remains within a falling wedge and well below its February high. A rally is hardly broad without the Nasdaq participating and this index needs to move above the February high to break the fall of the wedge.

By Arthur B. Hill - Wed 15-Feb-06 at 11:20AM in Indices
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Dow Transports Record New All Time High

The Dow Transports, which is another relatively narrow average of just 20 stocks, is also strong and breaking out to new ALL time highs. The Dow Industrials remains below its January 2000 high, but is poised to record a four year high. The Dow Transports is getting a bid from falling oil prices.

By Arthur B. Hill - Wed 15-Feb-06 at 11:20AM in Indices
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Dow Breaks Diamond Resistance

The Dow broke Diamond resistance with a long white candlestick and strong gain. 28 of the Dow components were up on Tuesday and the old industrial players are leading the way higher. The broad indices (those with more than 30 stocks) are lagging though and remain well below their February highs. Are these 30 stocks leading the way for the other 5000+ to follow?

By Arthur B. Hill - Wed 15-Feb-06 at 11:19AM in Indices
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Tuesday - February 14, 2006

Waste Connections Breaks Triangle Resistance

Waste Connections (WCN) breaks triangle resistance with good volume. The stock surged in November and then consolidated the last 2 months. The breakout signals a continuation higher and the upside target is 38-38.5. Key support is set at 33.9 and a move below this level would reverse the bull signal.

By Arthur B. Hill - Tue 14-Feb-06 at 07:15AM in Stocks
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Omnicom Gaps Up on Big Volume

Omnicom (OMC) is off to the races with a gap and long white candlestick breakout. The move broke channel resistance and exceeded the early February high on good volume. Key support is now set at 81.5 and it would take a move below this level to negate the breakout.

By Arthur B. Hill - Tue 14-Feb-06 at 07:13AM in Stocks
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Monday - February 13, 2006

Bonds and Interest Rates

What’s it going to be for bonds and interest rates? The 10-year T-Note Yield, which moves counter to bonds, broke above resistance with a big surge in late January TNX has since consolidated with some pretty volatile days the last two weeks. The yield surged above 4.6% (46) on 3-Feb and dipped to 4.5% this past Friday. After a weak open on Friday, TNX rallied for a strong close and this reinforces support. Further strength above 4.62% would be bullish for rates (up) and bearish for bonds (down).

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The big action was in the 30-year T-Bond Yield (TYX). As this chart affirms, the 30-year T-Bond Yield (TYX) is much more sensitive to rate changes than the 10-year T-Note Yield. After all, the 30-year is three times longer than the 10-year and this means that changes in interest rates will affect the value much more. The 30-year T-Bond Yield (TYX) gapped down on Friday with an open below 4.5%. The yield recovered by the close, but this gap is bearish for rates (down) as long as it remains unfilled. It would take a move above 4.75% (47.5) to forge a big breakout in rates (break down in bonds).

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The iShares ~20-year T-Bond Fund (TLT) represents the bond market and moves counter to interest rates. TLT moves up when rates move down and TLT moves down when rates move up. TLT gaped down in late January and broke trendline support. However, TLT managed to firm over the last few weeks with support at 90. This bond ETF gapped up on Friday, but closed weak and formed a long black candlestick. This is a pretty important failure and it would take a move above 91.5 for the bulls to get back their edge. Follow through with a move below 90 would be bearish for TLT.

By Arthur B. Hill - Mon 13-Feb-06 at 06:01AM in Bonds
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Friday - February 10, 2006

The Nasdaq Corrects Within Uptrend

The Nasdaq keeps going and going and going. The structure of this chart shows a clear rising trend and there are three distinct moves. The first was an advance above 2100. The second was a decline below 1900. The third is an advance above 2300. The third move is still underway and the black trendline extending up from the March low is holding. The index has consolidated the last few weeks and a move above the magenta trendline would keep the bull going. A move below the blue trendline and October low would forge a significant reversal.

By Arthur B. Hill - Fri 10-Feb-06 at 06:17AM in Indices
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The Dow Diamonds (DIA) Consolidates Within Uptrend

The Dow Diamonds (DIA) may not bee moving higher at the speed of light, but it is moving higher. The blue trendlines shows a rising wedge type formation and a relatively slow advance. Notice how flat the trendlines are. The stock is current trading just below the upper trendline and near resistance. A consolidation formed over the last few weeks and this holds the key for DIA. A move below the January low is bearish and a move above the January high bullish. Even with a support break, DIA would still be above the lower wedge trendline and it would take a move below the October low to seriously unleash the bears.

By Arthur B. Hill - Fri 10-Feb-06 at 06:17AM in Indices
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Thursday - February 09, 2006

The Dow Forms Another Diamond

Egads, it is another one of those diamonds. Just what is the diamond formation? First, it is a consolidation. The Dow is clearly caught in a trading range between 10650 and 11500. Sideways price action represents a consolidation. Second, the pattern is neutral until there is a breakout. The first half of the pattern shows an expanding range and the second half shows a contracting range (symmetrical triangle). The contracting range shows that the battle between bulls and bears is growing more intense. The first possible signal is a break above or below the triangle trendlines. The second signal is a move above the recent high or low. The third signal is a complete breakout from the whole range. The first levels to watch are 10950 up and 10700 down.

By Arthur B. Hill - Thu 09-Feb-06 at 07:22AM in Indices
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The Nasdaq Establishes Range Support

While the Dow touched its January low, the Nasdaq held well above its January low and formed a flat consolidation over the last few weeks. The ability to hold above the January low shows relative strength and this is positive. The index suffered sharp declines on 20-Jan (long black candlestick) and again last week (gap). Both found support around 2240 and the bulls must hold this level. To get the advance moving again, the Nasdaq needs to fill last week’s gap and break consolidation resistance at 2315.

By Arthur B. Hill - Thu 09-Feb-06 at 07:21AM in Indices
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Cisco Powers the Internet Architecture HOLDRS (IAH) higher

Led by a big move in Cisco, the Internet Architecture HOLDRS (IAH) stole the show yesterday. The stock broke resistance in November and returned to broken resistance in late October and early February. Broken resistance turned into support and the stock gapped higher yesterday. This gap solidifies support and opens the door to further strength above 38. This gap better hold and a move below 35 would be most bearish.

By Arthur B. Hill - Thu 09-Feb-06 at 07:21AM in Industries
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Wednesday - February 08, 2006

The S&P 100 Tests Neckline Support

The S&P 100 is testing neckline support of a head-and-shoulders reversal pattern. A break below 568 would exceed yesterday’s low and break neckline support. For now, it is holding and the trend remains up. Sure, the lower high at the end of January (right shoulder) is negative, but the pattern from late November to early February is just one big consolidation after the Oct-Nov advance.

By Arthur B. Hill - Wed 08-Feb-06 at 09:41AM in Indices
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The Biotech HOLDRS (BBH) Fails to Hold Gap

The Biotech HOLDRS (BBH) gapped higher last week, but failed to follow through and filled the gap yesterday. This is negative and keeps the falling price channel in play. Even though BBH has potential support in the low 190s from the 62% retracement and late January lows, there are no signs of sustainable buying pressure. The stock needs to move above key resistance at 202 to reverse this downtrend.

By Arthur B. Hill - Wed 08-Feb-06 at 09:40AM in Industries
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The Internet HOLDRS (HHH) Is Way Oversold

The Internet HOLDRS (HHH) is clearly in the falling knife category, but the stock is also entering a support zone around 60. The current decline (71-59) has created an oversold condition and there is support around 60 from the prior consolidation (gray oval). Making a play here is gutsy to say the least, but a bounce back to broken support around 65 is plausible.

By Arthur B. Hill - Wed 08-Feb-06 at 09:40AM in Industries
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Yahoo! Enters Support Zone

Yahoo!, a key stock in the Internet HOLDRS (HHH), traded down to support over the last few weeks. I should say the stock free fell to support with a big gap. The stock is clearly oversold and there is support around 32-33 from the February trendline and September lows. The stock formed a doji with a long lower shadow yesterday and is starting to show some firmness.

By Arthur B. Hill - Wed 08-Feb-06 at 09:39AM in Stocks
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The Retail HOLDRS (RTH) is Still Falling

The Retail HOLDRS (RTH) remains a major drag on the S&P 500. RTH surged in November and the corrected over the last two months. I say correction, but there is no end in sight. Well, the end is in sight, but the stock is not showing any signs of buying pressure. The decline formed a falling wedge, which is potentially bullish. However, the falling wedge requires confirmation with a breakout and the stock would need to move above 98 for the bulls to regain the upper hand. RSI continues to work its way lower and would need to move above 50 for momentum to turn bullish.

By Arthur B. Hill - Wed 08-Feb-06 at 09:37AM in Industries
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Tuesday - February 07, 2006

The S&P Large-Cap Value ETF (IVE) Consolidates

The S&P Large-Cap Value ETF (IVE) formed two doji over the last two days and has a potential pennant working over the last few weeks. The doji signal indecision and potential support. In addition, there is support around 65.7 from the prior low. The doji formed just above this low, but we have yet to see a bounce that would validate a higher low. A bounce from here would put the pennant into play and a break above 67.5 would keep the medium-term uptrend alive. Failure to hold 66 would be negative and lead to an even more important test of the January low.

By Arthur B. Hill - Tue 07-Feb-06 at 08:34AM in Indices
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The S&P Small-Cap Value ETF (IJS) Gets Overbought

The S&P Small-Cap Value ETF (IJS) does not have the pennant problem that faces the S&P Large-Cap Value ETF (IVE). Whereas the S&P Large-Cap Value ETF failed to exceed its early January, the S&P Small-Cap Value ETF moved to new highs at the end of the month. The trend is clearly up, but you can see that the stock is now trading near the upper trendline of a rising price channel. This means it is overbought and ripe for either a consolidation or a correction. Broken resistance around 65-66.5 turns into support and this is the level to watch on any pullback.

By Arthur B. Hill - Tue 07-Feb-06 at 08:33AM in Indices
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The Utility SPDR (XLU) Nears Support

The Utility SPDR (XLU) has been under pressure the last few weeks as it declined to support around 31.5. The December lows mark this support zone and the Jan-Feb decline retraced 38-50% of the Oct-Jan advance. The decline looks like a falling flag and XLU formed a bullish engulfing yesterday. However, given the volatile open of these ETFs, I am not going to take this pattern seriously until XLU breaks above 32.5.

By Arthur B. Hill - Tue 07-Feb-06 at 08:32AM in Sectors
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The B2B Internet HOLDRS (BHH) Hold Strong

Given the decline in the Nasdaq and Internet HOLDRS (HHH) over the last few weeks, the B2B Internet HOLDRS (BHH) is holding up quite well. The stock surged above resistance in late January and then consolidated the last two weeks with a small falling wedge. The stock moved higher again yesterday on good volume and I would stay bullish as long as the gap holds (2.4). This is a low priced stock with above average risk.

By Arthur B. Hill - Tue 07-Feb-06 at 08:30AM in Industries
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Monday - February 06, 2006

The Dow is Losing Momentum

The Dow is clearly having trouble with 11000 and MACD sports a big negative divergence over the last few months. A move below 10650 would be most bearish.

By Arthur B. Hill - Mon 06-Feb-06 at 07:46AM in Indices
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The Russell 2000 Still Outperforming

The Russell 2000 ($RUT) and small-caps do not seem to have the same problems though. RUT moved well above its early January high and MACD does not have a negative divergence working. The more things change the more they stay the same. Small-caps have been outperforming large-caps for years and there is no sign that this is about to change.

By Arthur B. Hill - Mon 06-Feb-06 at 07:46AM in Indices
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The S&P 100 Forms Another Head-and-Shoulders Reversal

In fact, one can even make the case for a bearish head-and-shoulders pattern on the S&P 100. The left shoulder formed in December, the head in early January and the right shoulder over the last two weeks. Neckline support is at 569 and a move below this level would be bearish.

The index also formed a head-and-shoulders pattern from June to September and broke neckline support in October. This breakdown did not last, but I would not ignore a break below 569 now.

By Arthur B. Hill - Mon 06-Feb-06 at 07:45AM in Indices
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QQQQ Gaps Below Trendline Support

QQQQ is also feeling the heat with a gap below the late January low and October trendline. In addition, RSI has a large negative divergence working and moved below 50. Only a break back above 42.5 for QQQQ and 55 for RSI would reverse the current technical damage.

By Arthur B. Hill - Mon 06-Feb-06 at 07:44AM in Indices
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The Consumer Discretionary SPDR (XLY) forms Rising Wedge (ETF)

The Consumer Discretionary SPDR (XLY) is stalling above key support at 32.7. The big pattern is a rising wedge, which is potentially bearish. To realize its potential though, a break below the lower trendline and late January low is required. As long as this trendline holds, the wedge is rising and the bulls get the benefit of the doubt.

By Arthur B. Hill - Mon 06-Feb-06 at 07:43AM in Sectors
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Friday - February 03, 2006

Dow Industrials Fails at 11000 Again

The Dow is meeting staunch resistance around 11000, a level that turned the Average back in December and January. February is getting off to the same start with a big black candlestick on Thursday and 11500 remains the level to beat. Notice that MACD has a large negative divergence working and is poised to dip into negative territory for the second time this year. Things are looking bleak for the Dow.

By Arthur B. Hill - Fri 03-Feb-06 at 06:28AM in Indices
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Negative Divergence May Haunt Dow Transports

We also have a non-confirmation with the Dow Transports in January. The Dow Transports moved to a new reaction high in late January, but the Dow Industrials failed to exceed its early January high and formed a lower high. Despite strength in BA and UTX, the Dow Industrials is not as strong as the Dow Transports. This is a Dow Theory non-confirmation and a move below the January lows (both Averages) would provide a Dow Theory sell signal. Also notice the RSI formed a large negative divergence over the last few months and upside momentum is waning for the Dow Transports.

By Arthur B. Hill - Fri 03-Feb-06 at 06:27AM in Indices
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Dow Utilities Running Out of Gas

The Dow Utilities was doing quite well until the end of January. The Average moved to a new reaction high on 25-Jan and then fell apart over the last seven days. The Average broke below the lower channel trendline and is poised to test key support at 402. A move below this level would be bearish for the group. MACD formed a slightly lower high in late January and is poised to move into negative territory, which would turn momentum bearish.

By Arthur B. Hill - Fri 03-Feb-06 at 06:25AM in Indices
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Thursday - February 02, 2006

Soros Sees Trouble in 2007

From Ameinfo.com: George Soros alarmed an audience in Singapore this week by claiming that 'the soft landing (for the US economy) will turn into a hard landing. That's why I expect the recession to occur in 2007 not 2006.' He went on to explain that the slowing US housing market would be the factor that finally tripped the economy into recession, albeit not until 2007.

Pulte Homes (PHM) has been going sideways for almost a year. However, this is not the first long consolidation and the big trend remains up. The stock traded flat from Nov-03 to Oct-04. As long as the October 2005 low holds, the big trend for PHM is up. This is a leader in the housing group and should be watched for signs of trouble.

By Arthur B. Hill - Thu 02-Feb-06 at 09:09AM in Economy
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Can Cisco Follow Through?

What’s it going to be Cisco? The stock surged in early January on good volume and then fell back to broken resistance around 18. A pullback to broken resistance is quite normal and the decline formed a falling flag. CSCO broke falling flag resistance last week, but has not been able to hold the breakout this week. A move above 19 would be bullish and open the door to 20, which marks a massive resistance zone that extends back to Nov-04.

By Arthur B. Hill - Thu 02-Feb-06 at 09:08AM in Stocks
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Biomet Forms Inverse Head and Shoulders Reversal

Biomet (BMET) has an inverse head-and-shoulders working with neckline resistance at 39. The stock formed an outside reversal week at the end of January and follow through above 39 would be most bullish.

By Arthur B. Hill - Thu 02-Feb-06 at 09:08AM in Stocks
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Leggett & Platt Legs Higher

Leggett & Platt (LEG) is getting a leg up with a consolidation breakout on good volume. Notice that upside volume surged at the beginning and the end of January. The breakout reinforces support just below 23 and a move below the January low would be bearish.

By Arthur B. Hill - Thu 02-Feb-06 at 09:07AM in Stocks
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Gap Inc Gaps Higher

Gap Inc (GPS) got a gap higher on pretty good volume at the end of January. That is not quite enough though. The stock formed a triangle over the last 2 1/2 months and has yet to break above the upper trendline. In fact, the gap/surge stopped right at trendline resistance and it would take a move to 18.5 to signal a continuation higher.

By Arthur B. Hill - Thu 02-Feb-06 at 09:06AM in Stocks
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Wednesday - February 01, 2006

Kemet Breakout

KEMET (KEM) is in the S&P MidCap Index, Technology sector and electronics sub-sector (industry group). The company has been losing money, but swung to a profit last quarter and may be turning the corner. The following paragraph from the company website sums up their:

***Today, KEMET leads the capacitor industry in producing high-performance solutions, including the world’s most complete line of surface-mount tantalum, ceramic, and aluminum capacitor technologies provided with near-perfect quality and on-time delivery at competitive prices to customer locations worldwide. KEMET capacitors are fundamental elements used in every type of electronic equipment, including computers, telecommunication, automotive electronics, military electronics, medical electronics, and consumer electronics. “High-Reliability” versions of our capacitors have shared in every important military/aerospace effort from the first Telstar to Viking, the Apollo moon landing, the Patriot missile, the Mir and International Space Stations, and the Pathfinder/Sojourner exploration of Mars. Production is measured in the billions of pieces per year.***

On the price chart, KEM shows signs of strong buying pressure with a triangle breakout and move above the August high. The stock is current challenging its 52-week high and this is the second surge on big volume. As a low priced stock, risk is above average and traders might put this one on the radar to buy on a dip.

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By Arthur B. Hill - Wed 01-Feb-06 at 11:07AM in Stocks
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