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Sector Watch, Sunday, 01/28/2001

Bad news in technology saw a lower open, but that was erased by sessions end. Fridays bullish standout was the BIX and it looks like the market is leaning toward a 50-basis point rate cut. If the Fed does not cut 50-basis points, be aware of support levels in technology!

Broad Market Sym Last Support Posture Resistance Alert
Dow Jones 30 DOW 10,659 10,400 11,050  
S&P 500 SPX 1,354 1,275 1,390  
NASD Comp COMPX 2,781 2,400 2,900  
S&P 100 OEX 709 650 740  
Russell 2000 RUT 498 440 505  
NASD 100 NDX 2,631 2,200 2,800  
High Tech MSH 783 655 835  
Technology Sym Last Support Posture Resistance Alert
Biotech BTK 639 510 690  
Hardware XCI 1,069 840 1,130  
Software GSO 327 245 350  
Semiconductor SOX 692 580 750  
Networking NWX 809 690 880  
Internet INX 240 200 280  
Finance Sym Last Support Posture Resistance Alert
Banking BIX 667 605 690  
Brokerage XBD 624 560 655  
Insurance IUX 754 710 810  
Other Sym Last Support Posture Resistance Alert
Retail RLX 880 820 920  
Drug DRG 412 380 450  
Healthcare HCX 869 830 950  
Airline XAL 164 155 185  
Oil & Gas OIX 305 294 330  

Market Posture Description

The Market Posture is a tool that has been designed to give you a snapshot glance of where the major market sector and indices are headed. The goal is for a visual representation within a specific area to help in gauging future movement. The description of each column is as follows.

SYM - This is the symbol that many charting services use for the corresponding sector.

LAST - Last trade value for the corresponding sector at 4:00 EST on the day (upper right corner) of the report.

SUPPORT - A level over the past three weeks where demand has been greater than or equal to supply. If this level were broken it could signal a bearish tone toward the sector/group. When support areas are broken, we then look for what could be the next level of support for that particular sector.

POSTURE - A graphical representation of a particular range that a sector is trading in. Traders should monitor this area against previous reports. Those sectors showing increasing demand should be moving from support to resistance. Conversely, those sectors where supply is greater should be moving down from resistance to support.

RESISTANCE - A level where supply has been greater than or equal to demand. If this level were broken it could signal a bullish tone toward the sector/group. When resistance areas are broken, we then look for what could be the next level of resistance for that particular group.

ALERT - A notification to traders that a previous level of support or resistance was broken and that action may be warranted.

This tool can be useful for bullish and bearish traders. When you've identified a sector that is of interest to you, you can then concentrate on stocks within that sector, thus making for a more focused and alert trader.

We realize that there are different kinds of bullish traders. There are those that like to buy stocks on pullbacks and those that prefer to buy "momentum", stocks that are breaking out of consolidation or to new highs. Whichever strategy you are most comfortable with, the Market Posture will help you quickly identify the level, within a trading range, where a particular sector is trading.

A bullish trader that prefers to buy "strong stocks" on pullbacks would be most likely to concentrate on a sector they have identified as having a bullish trend, that is currently trading in the lower half of the trading range and closer to a level of support. A bullish trader that prefers to buy "strong stocks" with momentum would focus on those sectors that have been in up-trends, and are trading near key resistance levels, where a significant breakout may occur.

Bearish traders can also benefit from this tool when determining levels at which to sell. There are two types of bearish traders. There are those that attempt to sell rallies and those that sell when a level of support has been broken.

Understanding risk is a concept that many traders and investors have trouble with. Not all sectors consistently move between support and resistance levels. At given times, sectors may tend to stay in the upper half of trading ranges, while others are stuck in a lower range. If you're bullish or bearish on a particular sector, you can use support/resistance levels to help assess and manage risk by implementing the use of stops below/above those levels.


Copyright 2001

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