An Important Pattern In The Monthly Chart

July 15, 2002
Daniel Beighley

The
major indexes sold off for most of the session before a rally in the
last hour-and-a-half sent price action rocketing into the close. Leading the
action were semiconductors, computer hardware, networking, and telecoms, as gold
and silver, oil, and pharmaceuticals closed deepest in the red.

Another dramatic intraday
reversal, but is it a bottom? While much of Wall Street is looking for
capitulation,

Mark Boucher warned in his last column that a high-volume drop on the
S&P 500
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) below its 924-950
support level will put in a head-and-shoulders top on the monthly chart. Today’s
volume was above average, though not heavy enough to signal a major change. This
index should be watched carefully in this zone for both price and volume
indications.

US
Treasury Bonds were down ’13 at 104 ’27.

In economic news, business inventories came in at 0.2% vs.
an anticipated decline of 0.1%. There was little market reaction off this
announcement.

Market breadth was mostly
negative, with NYSE declining issues over advancing issues by a ratio of
2.72, and down volume over up volume by a 2.16 ratio. Nasdaq declining issues
over advancing issues came in at 1.64, and up volume beat down volume by a 2.17
ratio. The

VIX was up 0.96 at 39.29. The

TRIN was down 0.08 at 0.76.

Above-average volume had the Dow, the S&P 500 and
the Nasdaq closing at the top of their daily ranges as tails were made on the
daily bars. The Semiconductor Index
(
$SOX.X |
Quote |
Chart |
News |
PowerRating), up 4.76%, closed at
the top of its daily range and above its 20-day MA at its high today. The
Broker/Dealer Index
(
$XBD.X |
Quote |
Chart |
News |
PowerRating), down 1.61%, closed in the upper half of
its daily range.

Drug giant Pfizer (PFE),
down 10.62% at 28.78, has announced that it agrees to buy Pharmacia (PHA),
up 20.43% at 39.25, for $60 billion, valuing Pharmacia stock at $45.08.

Also falling on accounting concerns, oil services company Haliburton
(
HAL |
Quote |
Chart |
News |
PowerRating),
was down 3.10% at 13.10 despite the company’s current CEO defending its
bookkeeping methods.

Beverage giant Coca-Cola Co.
(
KO |
Quote |
Chart |
News |
PowerRating), up 1.86% at 52.00, announced
that it would begin to count stock options as a cost of doing business. This is
expected to improve disclosure as accounting scandals create havoc on companies.

Software maker Siebel Systems
(
SEBL |
Quote |
Chart |
News |
PowerRating), up 2.165 at 11.78,Â has
been downgraded by Salomon Smith Barney to “neutral” from “buy,” as the price
target was cut to $13 from $21.Â

Alternative energy company Ballard Power
(
BLDP |
Quote |
Chart |
News |
PowerRating), down 20.48% at
12.03, was the focus of negative words in a Barron’s article that cited
the company has a high stock valuation, diminishing interest income due to low
interest rates, and a continued wait for commercialization of its fuel cell
technology.

Airline security company InVision (INVN),
up 11.15% at 27.10, announced that it expects to exceed its second-quarter
guidance with earnings of 48 cents a share vs. the Multex Consensus of 33 cents
a share.

Rental and service company Â Rent-A-Center
(RCII),
up 4.20% at 50.77, announced that it expects to exceed its second-quarter
guidance with earnings of $1.13 to $1.14 a share vs. the Multex consensus of
$1.10.

Consumer financial company New Century (NCEN),
up 3.03% at 27.87, has raised its second-quarter earnings guidance to $1.60 per
share vs. the Multex consensus of $1.46 per share.

An Important Pattern In The Monthly Chart

BUY THE FEAR, SELL THE GREED

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