MARKET PULLS BACK ON HEAVIER VOLUME -- INTEL LEADS SOX HIGHER -- GM FALLS ON VOLUME

MARKET A LITTLE OVERBOUGHT... Today's pullback isn't too surprising giving the fact that several of the major market averages are somewhat overbought. Charts 1 and 2 show essentially the same picture on two of today's more actively-traded indexes. The Nasdaq 100 Shares touched their upper Bollinger Band today before pulling back. The daily stochastic lines are also in overbought territory over 80. That simply means that the QQQs are over-extended at current levels and due for some profit-taking. All the of indexes are well above their moving average lines. The daily MACD lines in Chart 1 are still positive. Chart 2 plots the Directional Movement lines at the bottom of the chart. The +DI line is still over the -DI line, and the black ADX line is still rising. That means the three lines are still in positive alignment. One factor that is a little disturbing is today's higher volume. That's a short-term negative. What was also disturbing was that the pullback came on good news -- especially in the semiconductor group.

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SOX BREAKOUT FADES... Some strong earnings numbers propelled the Semiconductor (SOX) Index to a new 52-week high this morning. By the afternoon, however, the SOX barely squeezed out a small gain. We're not inclined to read too much into one day's action, but the late day fade was a little disappointing. Several of the SOX stocks gapped higher during the day.

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AMAT AND NVLS JUMP ON VOLUME... Two of the day's biggest gainers in the SOX were Applied Materials and Novellus. Both jumped on very impressive volume. AMAT held onto most of its gains as did NVLS. The latter stock, however, closed below its opening price and in the lower end of the day's range. Both stocks may need to test potential support in today's underlying gap area. Intel provided the day's biggest boost.

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INTEL HITS 52-WEEK HIGH... A strong earnings report after the close last night catapulted Intel to a new 52-week high today on strong volume. The stock gapped higher, but ended near the day's low. That may suggest the need for a test of today's gap area. The daily RSI moved just over 70 today, which puts it into overbought territory. That may also account for some of the late selling. The weekly bars also show a stock in overbought territory and approaching potential resistance in the 35-36 region. The trend, however, is still up.

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DOW MOVERS... Two of today's Dow leaders are shown below. Home Depot has broken out to a new yearly high on rising volume. Hewlett Packard has just risen to a two-month high. It's volume pattern has also turned positive. One of the Dow's prominent losers was Gemeral Motors. Chart 10 shows the big auto stock reversing to the downside today on increasing volume. That was one of the contributing factors behind this afternoon's selling. The market looks over-extended and is probably due for a pullback. Most of our intermediate-term indicators, however, are still positive.

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