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Market Sentiment, Tuesday, 07/27/2004

Stocks Bounce Big
By James Brown

The oversold rally many traders have been looking for finally occurred on Tuesday and stocks bounced pretty strongly. The rally was very wide with only the HMO healthcare index and the XAL airline index closing in the red. HMO-related stocks were lower on news out of Cardinal Health (CAH) who reported that its CFO had abruptly resigned while the company was dealing with an SEC probe into its accounting. Meanwhile the XAL airline index slipped as crude oil prices tagged $42 a barrel on an intraday basis.

There is no denying the strength in the bounce today. Market internals were very bullish. Advancers outnumbered decliners 2- to-1 on the NYSE and 21 to 9 on the NASDAQ. Up volume was more than double down volume on the NYSE and more than 3-to-1 on the NASDAQ. Overall volume was pretty strong. The only fly in the soup with today's rebound is that many investors are skeptical. The markets have been so oversold that we were due for a bounce. Now that we've got it there are plenty of traders who are going to use any sign of strength as a new opportunity to get short.

Bulls will point to today's consumer confidence numbers, which hit new two-year highs. This is a very good economic data and it should filter into the retailers who have been suffering from the June "slump". If consumers are confident then they should be spending. That will keep GDP growth strong, which would be a big bonus for stocks as we head into the generally weak third quarter.

Wall Street is also measuring how much the Democratic National Convention might give John Kerry a boost in the polls. Political opinions aside current logic states that if Kerry gains in the polls then stocks will struggle because that puts the Bush tax cuts on the chopping block.

Tomorrow brings the durable goods orders and the Federal Reserve's Beige book report. If the economic data is good we could see a second day to this rally. Don't forget that we're still in the midst of the Q2 earnings season and there will be plenty of stock-specific stories that could move their individual sectors.


Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  8997
Current     : 10085

Moving Averages:
(Simple)

 10-dma: 10086
 50-dma: 10215
200-dma: 10220

	
S&P 500 ($SPX)

52-week High: 1163
52-week Low :  960
Current     : 1094

Moving Averages:
(Simple)

 10-dma: 1098
 50-dma: 1116
200-dma: 1106

		
Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1204
Current     : 1391

Moving Averages:
(Simple)

 10-dma: 1397
 50-dma: 1444
200-dma: 1447

		



CBOE Market Volatility Index (VIX) = 16.55 -0.75
CBOE Mkt Volatility old VIX  (VXO) = 15.70 -1.30
Nasdaq Volatility Index (VXN)      = 24.31 -0.98


Put/Call Ratio Call Volume Put Volume Total 0.72 720,204 520,685 Equity Only 0.55 570,934 314,997 OEX 0.87 22,924 19,842 QQQ 0.42 35,070 14,881
Bullish Percent Data Current Change Status NYSE 60.4 - 2 Bear Confirmed NASDAQ-100 36.0 + 1 Bear Confirmed Dow Indust. 56.6 + 0 Bear Confirmed S&P 500 54.4 - 1 Bear Confirmed S&P 100 56.0 - 1 Bear Confirmed Bullish percent measures the number of stocks in an index currently trading on a buy signal on their point and figure chart. Readings above 70 are considered overbought, and readings below 30 are considered oversold. Bull Confirmed - Aggressively long Bull Alert - Cautiously long Bull Correction - Pause or pullback in upward trend Bear Alert - Take defensive action if long Bear Confirmed - High risk if long, good conditions for shorting Bear Correction - Pause or rebound in downtrend
5-dma: 1.18 10-dma: 1.29 21-dma: 1.30 55-dma: 1.12 Extreme readings above 1.5 are bullish, and readings below .85 are bearish. These signals don't occur often and tend be early, but when they do, they can signal significant market turning points.
Market Internals -NYSE- -NASDAQ- Advancers 1855 2100 Decliners 963 940 New Highs 32 21 New Lows 28 87 Up Volume 1266M 1330M Down Vol. 641M 391M Total Vol. 1952M 1737M M = millions
Commitments Of Traders Report: 07/20/04 Weekly COT report discloses positions held by small specs and commercial traders of index futures contracts at the Chicago Mercantile Exchange and Chicago Board of Trade. COT data can be found at www.cftc.gov. Small specs are the general trading public with commercials being financial institutions. Commercials are historically on the correct side of future trend changes while small specs tend to be wrong. S&P 500 Commercial traders have upped their short positions a tad while reducing their longs by nearly the same amount. Yet the change is rather insignificant. Small traders pared back their shorts by a very small amount and remain net bullish. Commercials Long Short Net % Of OI 06/29/04 405,273 413,351 ( 8,078) (0.9%) 07/06/04 402,952 416,526 (13,574) (1.7%) 07/13/04 407,166 416,869 ( 9,703) (1.2%) 07/22/04 404,828 419,017 (14,189) (1.7%) Most bearish reading of the year: (111,956) - 3/06/02 Most bullish reading of the year: 23,977 - 12/09/03 Small Traders Long Short Net % of OI 06/29/04 129,978 94,535 35,443 15.7% 07/06/04 132,423 90,748 41,675 18.7% 07/13/04 133,935 95,787 38,148 16.6% 07/22/04 138,123 94,990 43,133 15 Most bearish reading of the year: (1,657)- 5/27/03 Most bullish reading of the year: 114,510 - 3/26/02 E-MINI S&P 500 There is some interesting action in the e-minis. Commercial traders significantly added to their long positions, which reduced their overall net bearish stance to the lowest level in weeks. Small traders, in contrast, reduced their longs and added to their shorts. This could be viewed as a bullish move in sentiment except institutional traders remain net bearish. Commercials Long Short Net % Of OI 06/29/04 258,443 447,505 (189,062) (26.7%) 07/06/04 287,442 423,583 (136,141) (19.1%) 07/13/04 265,142 427,017 (161,875) (23.4%) 07/22/04 309,972 428,240 (118,268) (16.0%) Most bearish reading of the year: (354,835) - 06/17/03 Most bullish reading of the year: 133,299 - 09/02/03 Small Traders Long Short Net % of OI 06/29/04 236,492 47,780 188,712 66.3% 07/06/04 219,321 58,567 160,754 57.8% 07/13/04 225,410 57,699 167,711 59.2% 07/22/04 212,078 62,416 149,662 54.5% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Very little action in the commercial traders with similar additions to both longs and shorts. Meanwhile small traders upped their longs and reduced their shorts and that significantly reduced their overall bearish posture. Commercials Long Short Net % of OI 06/29/04 41,078 37,194 3,884 4.9% 07/06/04 42,245 37,343 4,902 6.2% 07/13/04 44,211 37,007 7,204 8.9% 07/22/04 45,069 37,975 7,094 8.5% Most bearish reading of the year: (21,858) - 08/26/03 Most bullish reading of the year: 25,160 - 06/01/04 Small Traders Long Short Net % of OI 06/29/04 7,437 11,904 (4,467) (23.1%) 07/06/04 9,345 16,527 (7,182) (27.8%) 07/13/04 7,847 15,243 (7,396) (32.0%) 07/22/04 9,398 11,776 (2,378) (11.2%) Most bearish reading of the year: (20,270) - 06/01/04 Most bullish reading of the year: 19,088 - 01/21/02 DOW JONES INDUSTRIAL Almost no change in positions for commercial traders but small traders have pared back their bearish positions. Commercials Long Short Net % of OI 06/29/04 27,278 20,512 6,766 14.1% 07/06/04 27,214 20,775 6,439 13.4% 07/13/04 27,773 20,573 7,200 14.9% 07/22/04 27,957 20,389 7,568 15.7% Most bearish reading of the year: (8,322) - 1/16/01 Most bullish reading of the year: 15,135 - 10/16/01 Small Traders Long Short Net % of OI 06/29/04 4,930 7,682 (2,752) (21.8%) 07/06/04 5,969 8,227 (2,258) (15.9%) 07/13/04 5,292 9,068 (3,776) (26.3%) 07/22/04 4,857 7,297 (2,440) (20.1% Most bearish reading of the year: (12,106) - 3/09/04 Most bullish reading of the year: 8,523 - 8/26/03


 

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