TECHNOLOGY FINALLY SHOWS SOME BOUNCE -- NASDAQ INDEXES CLEAR 50-DAY AVERAGE -- INTEL BREAKS OUT WHILE CISCO AND ORACLE ADVANCE -- PROFIT-TAKING IN ENERGY
PROFIT-TAKING IN ENERGY ... Last week I wrote about the fact the Oil Service Holders (OIH) were in an overbought condition and up against chart resistance formed during 2000 at the 100 level. Prices backed off from that level last Monday. After a low-volume retest of that level again on Friday, it's selling off again today along with the rest of the energy sector. That doesn't necessarily signal a top in energy. It does suggest, however, that the runup in energy has come too far, too fast and is need of a breather. Hence some profit-taking. That was also why I suggested last week that I didn't think this was a good time to be committing new funds to this overbought sector. I'd prefer to wait for lower prices. The first level of potential support is the 20-day moving average (see arrow). That should be good news for the market, however, at least as long as energy remains weak. More good news today is coming from the technology sector which has not participated in the rest of the market's rally. Today technology is actually leading.
Chart 1
NASDAQ EXCEEDS 50-DAY AVERAGE ... Charts 2 and 3 show the Nasdaq Composite and the Nasdaq 100 indexes trading above their 50-day moving averages for the first time this year. That's an important breakthrough if it lasts into today's close. That's because the Nasdaq market hasn't participated in the recent rally in the rest of the market -- especially with blue chip stock indexes reaching new highs. In today's trading, the Nasdaq is actually outperforming the other market indexes. That's a good sign for technology and should help prolong the current market rally. As has been the case recently, most of the technology leadership is coming from semiconductors like Intel. Some other big technology stocks are turning up as well.
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INTEL BREAKS OUT ... Intel, which is often viewed as a chip bellwether, is breaking through its November high at 25. Its relative strength line is also rising. Intel not only carries a lot of weight in the Nasdaq (because of its size), but is an influential chip stock. Its upside breakout increases the odds for a similar breakout by the SOX Index which is gaining ground today.
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CISCO AND ORACLE CLEAR 50-DAY LINES... A couple of other big Nasdaq stocks that are doing well today are Cisco and Oracle. Both influential Nasdaq stocks are trading over their 50-day lines for the first time in at least a month. Cisco is still trading below its 200-day average. Oracle, however, is trading well above that long-term support line. When big techs like these start to rally, that gives a big boost to the Nasdaq market and especially the Nasdaq 100 which is gaining nearly 2% to pace the rest of the market.
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