What This Bellwether Is Telling Us

The latest reading on corporate health, this time from
bellwether Hewlett-Packard
(
HWP |
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PowerRating), is putting the lid on a potential reflex
rally as the heaviest week of releases of quarterly earnings draws to a close. 

The Dow is down 80 at 10,325, the Nasdaq is down 11.65
at 1972, and the S&P 500 is down 4.13 at 1186.36.

The world’s second-largest computer firm said sales
will miss forecasts this quarter and that it would slash its workforce by 6%.
Appropriately, traders are punishing H-P with a 6% shave of its share price,
driving the stock down 1.69 to 23.99.

A report from the Commerce Department is supporting
Hewlett’s projections of slower sales ahead. Orders for durable goods,
products that last more than a couple years, fell by 2% in June, much more
than expected and highlights the weakness in the manufacturing economy. 

Another bellwether in computing, Compaq
(
CPQ |
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PowerRating), also
cut sales forecasts and fell early to nearly a multi-year low before
recovering to a slight loss, down .12 at 14.00.

On the upside, Pharmaceutical Product Development
(
PPDI |
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PowerRating)
triggered a potential long entry out of a Pullback From Highs setup. Dave
Landry also pointed out this stock in his Trading Outlook as a “high
level cup and handle” setup.

In her Market Pulse column, Carolyn Lueck shows you a
great example of a “shaven top” candlestick formation that halted
the rally in Taro Pharmaceuticals
(
TARO |
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PowerRating). Taro has fallen more than 10
points today and has provided intraday short entry out of a descending
triangle formation.