Sector Investing

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9:23AM The Technical Take : If you looked at the final tally for Monday's session it looked like a typical dull summer session as the averages and volume ended mixed. However, trade was actually rather exciting (at least for chart watchers) on an intraday basis as the averages extended the slide of the last few sessions in a relatively aggressive fashion in the early going and moved precariously close to the edge of the cliff before buying interest surfaced near important chart points.

It was a similar situation from a sector perspective. As you may recall, we have been highlighting the technical performance of the major sector indices to help get a feel for the underlying strength of the market despite the confined trading action. Yesterday's action saw financials like the broker/dealer (XBD) and insurance (IUX) as well as retail (RLX) bounce off their respective 50 day mov avg. The underperforming banking sector (BKX) fell below the 50 day and bounded back up to this level. Failure to hold above for the first three or breach as resistance for the latter would make the case for limited upside potential for the major market averages. Other groups sitting right at support at their 50 day averages include: biotech (BTK), software (GSO), computer-hardware (HWI), Internet (DOT), housing (HGX).

Nasdaq Composite: For this index the key support level was once again the top of the June trading range at 1686. The turnaround left the index back above key shorter term moving averages (20/30 day exp), near the midpoint of its month long trading range with the close right on the 1715/1713 area that has been an intraday pivot on several occasions over the last few weeks. The reversal day is a positive but the overall situation remains unchanged with range trade dominating until follow through develops amid improved volume.



http://biz.yahoo.com/mu/story.html