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Sector Watch, Thursday, 12/28/2000

Three alerts were triggered at resistance in the past two sessions. Raising support (DOW, SPX, COMPX, SOX, NWX). Raising resistance (RUT, BIX, OIX). We bumped up the above support levels, as we are starting to see some strengthening in those sectors. Traders should make a mental note of our resistance levels on the GSO.X, XBD, IUX, RLX, DRG, and HCX, as they are closer to being hit.

Broad Market Sym Last Support Posture Resistance Alert
Dow Jones 30 DOW 10,868 10,300 11,000  
S&P 500 SPX 1,334 1,255 1,390  
NASD Comp COMPX 2,557 2,300 3,025  
S&P 100 OEX 692 650 740  
Russell 2000 RUT 494 440 505
NASD 100 NDX 2,464 2,175 2,790  
High Tech MSH 692 615 750  
Technology Sym Last Support Posture Resistance Alert
Biotech BTK 643 590 710  
Hardware XCI 933 860 1,130  
Software GSO 300 250 330  
Semiconductor SOX 602 530 690  
Networking NWX 748 645 860  
Internet INX 200 170 240  
Finance Sym Last Support Posture Resistance Alert
Banking BIX 658 585 670
Brokerage XBD 574 500 585  
Insurance IUX 841 760 870  
Other Sym Last Support Posture Resistance Alert
Retail RLX 845 770 850  
Drug DRG 449 420 460  
Healthcare HCX 943 875 945  
Airline XAL 162 146 166  
Oil & Gas OIX 319 284 330

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.


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