Where The Upside Leadership Is Now

July 31, 2002
Daniel Beighley

Price
action on the indexes held narrow ranges for most of the session,
though a late-day rally managed to close the Dow and S&P 500 in positive
territory, while the Nasdaq was slightly down. The biggest gainers were
healthcare, utilities, oil, banks, and natural gas, while the biggest losers
were in computer hardware, semiconductors, Internet, and networking.

Showing strength, the
Biotechnology Index
(
$BTK.X |
Quote |
Chart |
News |
PowerRating), up 0.95% at 364.98, has made its second
close above its 50-day moving average. This is the only major sector now above
this level, with the Pharmaceutical Index
(
$DRG.X |
Quote |
Chart |
News |
PowerRating), up 2.20% at
298.95, not too far behind. As things stand, this is our leadership for the
upside.

Meanwhile, the Semiconductor
Index
(
$SOX.X |
Quote |
Chart |
News |
PowerRating), down 4.47%, had a bad day as it turned down form its
20-day moving average.Â

U.S. Treasury Bonds were
up 1’08 at 105 ’30.

In economic news, the Chicago Purchasing Managers Index
for July fell to 51.5% vs. June’s 58.2%. This was the worst reading since
January, and was lower than the 56.4% anticipated by economists. Also the GDP
was revised down to show 5% growth vs. the previously recorded 6.1% rate.

Market breadth was mostly
negative, with NYSE advancing issues over declining issues by a ratio of
1.04, and down volume over up volume by a 1.14 ratio. Nasdaq declining issues
over advancing issues came in at 1.39, and down volume beat up volume by a 3.05
ratio. The

VIX was up 0.06 at 35.21. The

TRIN was up 0.41 at 1.17.

Above average volume on the NYSE and below average
volume on the Nasdaq had the Dow the S&P 500, and the Nasdaq closing at the
top of their daily ranges. The Broker/Dealer Index
(
$XBD.X |
Quote |
Chart |
News |
PowerRating) up
0.31%, closed below its 20-day MA.

Entertainment company America Online
(
AOL |
Quote |
Chart |
News |
PowerRating), down 7.25% at 11.50,
is now at the center of a Federal investigation over accounting issues. The
company said it is cooperating with the investigation, and stand by its
accounting methods.

Computer hardware maker International Business Machines
(
IBM |
Quote |
Chart |
News |
PowerRating),
down 1.93% at 70.40, said that it has agreed to buy the consulting arm of
PricewaterhouseCoopers for $3.5 billion in cash and stock.

Chip maker KLA-Tencor
(
KLAC |
Quote |
Chart |
News |
PowerRating), down 2.35% at 39.39, announced that
fourth-quarter earnings beat expectations, though the company warned that weak
IT spending will hinder earnings going forward.

Also in the chip business, Nvidia Corp.
(
NVDA |
Quote |
Chart |
News |
PowerRating), down 31.75% at
11.07, warned that its second-quarter earnings will not meet expectations.

In the telecom sector Verizon
(
VZ |
Quote |
Chart |
News |
PowerRating), up 9.27 at 33.00, announced
profits in line with expectations and said it expects profits to be flat or down
1% for 2002.

Drug maker Eli Lilly (LLY),
up 0.29% at 58.42, has been downgraded by Merrill Lynch to near-term “neutral”
from “buy” after meeting its price target of $57 and uncertainties over
manufacturing in the near-term.

Financial company American Express (AXP),
up 3.95% at 35.26, has been upgraded by Lehman Brothers to “strong buy” from
“market perform” based on belief management will deliver earnings despite
difficult revenue environment and valuation.

Biotechnology company
Amgen (AMGN),
up 0.32% at 45.64, has lost a court case in the UK over a patent claim against
French company Aventis. The decision reversed an earlier claim in favor of
Amgen.

Retailer Hot Topic (HOTT),
down 30.24% at 15.66, has lowered its second-quarter and third-quarter outlook
due to weaker than expected sales. Second-quarter revenue is expected to now
come in at 13 cents a share vs. the 15 cents a share predicted by analysts.

Where The Upside Leadership Is Now

BUY THE FEAR, SELL THE GREED

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