SHORT-TERM MARKET TREND CONTINUES TO IMPROVE, BUT ON LIGHT VOLUME -- MARKET ON FED WATCH -- JUNIPER AND ORACLE BOUNCE OFF 200-DAY AVERAGES -- HOUSING INDEX IS TESTING ITS 200-DAY LINE -- KROGER REACHES NEW SEVEN YEAR HIGH

MARKET ON FED WATCH ... It's doubtful that the Fed will take any action on interest rates tomorrow. Some are hoping, however, for a change in the wording of its statement. Over the past few months, the Fed has expressed more concern about the elevated inflation rate and less about the possibility of a weaker economy. Recent problems in the housing area, however, might prompt the Fed to soften its wording a bit. What makes such a change more difficult is the fact that inflation remains stubbornly high. Any hint that the Fed is softening its inflation watch could give the market a short-term boost. I suspect that the price advance of the last two days is primarily due to evening up of positions ahead of the Fed announcement. Although some short-term price improvement has taken place, the low level of trading volume shows a lack of bullish enthusiasm.

NASDAQ AND NYSE EXCEED SHORT-TERM RESISTANCE ... Chart 1 shows the NYSE Composite Index closing just above recent resistance at 9135. Chart 2 shows the Nasdaq Composite closing over the recent short-term peak at 2404 (and general resistance around the 2400 level). Those price gains are mitigated, however, by generally light trading activity. Both indexes also remain below their 50-day moving averages. At the very least, today's upside progress has kept the market above long-term support levels and has repaired some of the technical damage done a couple of weeks ago. Not that the chart looks much more bullish. It just looks a little less bearish. We may know more about the staying power of the current bounce by close of trading tomorrow. In other markets, a drop in bond yields weakened the dollar which gave a boost to gold prices. A big drop in Halliburton caused profit-taking in Oil Service Holders. Little technical damage was done however.

Chart 1

Chart 2

JUNIPER AND ORACLE BOUNCE OFF 200-DAY LINES ... Yesterday I showed Microsoft bouncing off its 200-day moving average. Chart 3 shows Juniper Networks jumping more than 4% today on rising volume. The stock bounced off its 200-day line last week. Oracle has done even better. That stock has not only bounced off its 200-day line, but has risen back over its 50-day line. And it did so on rising volume. A lot of stocks, and some major indexes, are testing major support at those 200-day averages. That's a major test since the 200-day moving averages help define whether a stock, or the market, is in a bull or bear market.

Chart 3

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HOUSING INDEX TESTS ITS 200-DAY LINE... Yesterday I showed financial stocks starting to bounce off their 200-day average. Here's another group on the critical list. Chart 5 shows the PHLX Housing Index sitting right on its 200-day line. The group took some comfort from today's report of a jump in February housing starts. We'll take comfort only if the HGX is able to stay over its 200-day line.

Chart 5

KROGER REACHES SEVEN-YEAR HIGH ... In my story last Friday on consumer staple leaders, I showed Kroger testing resistance at its 2001 highs. The stock surged more than 3% today on strong volume to exceed that prior peak. The monthly bars in Chart 6 show the stock now trading at the highest level in more than seven years.

Chart 6