TEXAS INSTRUMENTS SPARKS SOX BUYING -- NASDAQ CLIMBS ON GOOD VOLUME
TEXAS INSTRUMENTS SPARKS SOX BUYING ... A high-volume gain in Texas Instruments help lead a 5% gain in the Semiconductor (SOX) Index which had just hit a new 52-week low yesterday. Chart 1 shows TXN gapping up and through its 50-day moving average and reaching a new high monthly high. The upside volume was even more impressive. Just yesterday I expressed concern about the upside potential for the Nasdaq in the face of a weak chip group. If today's sharp bounce has any staying power, that should carry good news for the Nasdaq.
Chart 1
NASDAQ GAINS ON GOOD VOLUME... The Nasdaq Composite Index gained 19 points today and was the day's strongest index. More importantly, it rose on good volume. Today's volume bar in Chart 2 is the biggest in a month. Upside volume has been a missing ingredient in the market's rally -- at least up to now. The Nasdaq may also be poised to break through its 50-day moving average as well. That would be another positive sign. Small caps also had a strong day.
Chart 2
SMALL CAPS STARTING TO SHOW LEADERSHIP... After lagging behind large caps for most of the summer, small caps are starting to show some relative strength. Small cap stocks rose more than large caps today. The daily chart of the S&P Small Cap Index shows prices hitting a two-month high. The SML/S&P 500 ratio is now trading at the highest level since the middle of July. That's usually a sign of more investor confidence.
Chart 3
S&P 500 BOUNCES OFF 200 DAY LINE... Although most of today's headlines involved the Nasdaq, the broader market closed higher as well (expect for the Dow which lost 24 points). Chart 4 shows the S&P 500 bouncing off its 200-day average today. We've been watching closely to see if the major averages can stay over that long-term support line. Even with today's loss, the Dow still remains above its 200-day line.
Chart 4
OIL SERVICE INDEX HITS NEW HIGH ... A nearly $2.00 jump in the price of oil gave a big boost to energy stocks today. The most impressive showing came in the oil service group. The Oil Services Index (OSX) broke out to a new 52-week high.
Chart 5
FRIDAY'S CLOSE COULD BE IMPORTANT... Friday's close is always the most important of the week. That's because it's the closing price on weekly charts and weekly indicators, which are more important than daily charts. I recently talked about the fact that one of our highly reliable weekly indicators was close to turning positive, but hadn't done so yet. That's why this Friday's close may carry more significance than usual. That's also why we'll be watching tomorrow's action very closely.
