Weekly Technical Commentary by Art Huprich - Friday Morning 02/06
Accompanied by an expansion in NYSE volume from Wednesday’s level (1.62 billon shares versus 1.39 billion shares) the major market indices recorded a positive multi-swing session, during which the stock market absorbed a weaker than expected economic report. Specifically, the DJIA was down 111 points shortly after 10:00 a.m. From there the “senior index” built a head of steam, aided by rumors surrounding a “good bank – bad bank” deal over this weekend, and was up 151 points near 2:30 p.m. At the close, the DJIA gained 106 points. Speaking of the DJIA, DIS ($18.71) closed at a fresh 52-week low, accompanied by above average volume. This brings into sight a support line drawn off its 1987 low at approximately $17.36. Please use this accordingly because the next level of significant support is in the middle $13.50 area.
Besides the multi-swing session yesterday, another positive short-term observation is that while the DJIA has been undercutting its late January lows, the SPX (845.85), NASDAQ (1546.24), SML (239.48), or MID (511.10) have not. This is a bullish short-term divergence and bears (no pun intended) watching.
Speaking of late January, in late January the Bank Index (BKX/27.13) established critical short-term support at 25.33 – see 1/22/09 report. After having done so, the index rallied to 32.63. As a result of yesterday’s action, during which the BKX traded as low as 24.95 (please recall a retest can occur slightly above or below the initial low) and closed higher, I will say that the BKX retested its late January low and held. What this suggests, tactically, is if you are long bank related stocks that are in downtrends and were lower yesterday but closed higher, please use yesterday’s intraday low as a stop loss point.
While Crude Oil ($41.17) continues to remain above critical long-term support in the area of $35 to $33, many energy stocks are rebuilding new underlying bases, which is encouraging. This observation is confirmed by looking at the relative strength trend configuration of the Energy Select Sector SPDR (XLE/48.57) versus the S&P 500...
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