We head into the second half of the session with the Dow Jones Industrial Average (DJIA) acting sluggish. At its lows of the day, the average was down just 38 points and the highs were hit with a gain of 48 points. This gives us an anemic intraday range of just 85 points. It wasn't too long ago that ranges frequently exceeded 400 points. What's more, a look to the intraday chart shows that range was established in the first hour. The action since then has been even tighter.
The sector action offers us a few bright spots though as we have moderate gains in biotech, financials, and commodities. The Amex Biotech Index (BTK) is leading the advancers. A check of the components for that index shows Nektar Therapeutics (NKTR) is up 11% while Alexion Pharmaceuticals Inc (ALXN) is up 8%.
The relatively quiet broad market action gives me a chance to revisit this post - Midday Market Check - A Long-Term Perspective on the Dow Jones Industrial Average and Other Indices - which discussed the 2002 lows. It has been just over a month since then but we find the market more or less unchanged. The S&P 500 (SPX) is up 1 point while the Dow Jones Industrial Average (DJIA) is down 0.9%. The Nasdaq Composite (COMP) and Russell 2000 (RUT) are slightly more volatile with gains of 3% and 5%, respectively.
In other words, we still appear to be mired in the choppy back and forth described last month. As I look at the updated monthly charts below, I am still of the same mindset as what I said last month -
"My overall takeaway here is that we are still in the long-term process of trying to stabilize at support. One of the key things to note here is the action around the 2002 bottom. Specifically, I am talking about the length of time it took for that bottom to form. If you look at the S&P 500 (SPX), you see it first neared the zone that would eventually serve as support in July 2002. By March of 2003, the index was still testing that zone. It wasn't until May or even June of 2003 that you could see signs the SPX was bouncing. In other words, it took somewhere in the neighborhood of 10 months for the bottoming process to be complete."
The bumpy action since that post seems to fall in line with what we might expect, based on the 2002 experience. Buyers stepped in at the 2002 lows and, since November, we have seen a general bounce. Yesterday I noted signs that the near-term momentum was waning but that is what you might expect to see in the "choppy environment" scenario. As discussed last week, a breakdown below the November lows would be a big warning sign, but we would need to see some moderate selling before we get to that point.
Chart Courtesy of Thomson Financial
Chart Courtesy of Thomson Financial
Copyright Schaeffer's Investment Research http://www.schaeffersresearch.com