Be Alert To This Divergence

June 24, 2002
Daniel Beighley

The major indexes began the
session by carrying over Friday’s slide, but they bottomed out by 1:00 p.m. ET
for rallies into positive territory. Technically
oriented traders will be alert to the negative
divergence seen in market breadth.
The market will do what it’s going to do, but the fact that there were
more decliners than advancers may play into the sustainability of the
rally.
The biggest advances were in semiconductors, biotechnology, computer hardware,
and Internet stocks; European, healthcare, airline, telecoms and utilities made
up the biggest decliners.

U.S. Treasury Bonds were
down 0.84 at 103 ’08.

There were no economic reports released today. Tomorrow
will be consumer confidence, existing home sales, and the first
day of a two-day FOMC meeting.

Market breadth was mostly
negative, with NYSE declining issues over advancing issues by a ratio of
1.50, and down–volume
over up–volume
by a 1.38 ratio. Nasdaq declining issues over advancing issues came in at 1.20,
and up–volume
beat down–volume
by a 1.41 ratio.Â The
VIX
was down 1.41 at 29.87. The TRIN
was down 1.27 at 0.83.

Above average volume had the
Dow and the S&P 500 close in “doji” formations, and NasdaqÂ closed
in the upper half of its daily range. The Semiconductor Index
(
$SOX.X |
Quote |
Chart |
News |
PowerRating),
up 3.99%, formed a lower low and higher high from Friday’s close. The
Broker/Dealer Index
(
$XBD.X |
Quote |
Chart |
News |
PowerRating), up 1.04%, closed in the upper half of
its daily range.

Auto maker DaimlerChrysler
(
DCX |
Quote |
Chart |
News |
PowerRating), down 0.13% at 43.55, announced
that its US operations will be profitable for the year, and they may increase
their targets.

Construction and agricultural machinery company and Dow component Caterpillar
Inc.
(
CAT |
Quote |
Chart |
News |
PowerRating), down 0.27% at 47.55, was downgraded by UBS Warburg to
“underperform” from “neutral” citing weakness in
road-building, non-residential construction, power generation and heavy truck
engines.

Tobacco maker RJ Reynolds
(
RJR |
Quote |
Chart |
News |
PowerRating), down
9.50% at 55.70, was ordered by a federal court to pay $15 million in damages to
a Kansas smoker.

Discount retailer Wal-Mart
(
WMT |
Quote |
Chart |
News |
PowerRating), up
1.40% at 55.75, said that their June same-store sales were coming in at the
upper end of their range.

It is
being reported by the Wall Street Journal that 11 insurance companies say
new legal documents illustrate how money
center bank JP Morgan (JPM),
up 0 .57 at 33.18, made Enron appear financially healthier than it was. This
finding will act as a defense to the insurance companies‘
dispute over who is responsible for more than $1 billion in Enron financing.

Martha Stewart is being reported by the Wall
Street Journal to be in conflict with the findings of a Merrill Lynch sales
assistant who claims the media entrepreneur had no stop-loss agreement for her
shares of Imclone.

Semiconductor company ESS Technology (ESST),
up 2.37% at 17.24, is boosting its third
quarter guidance
to 35 to 38 cents a share vs. previous guidance of 25 to 30 cents. The company
increased its second quarter
guidance a week ago.

Also in the semiconductor sector, Microsemi
Corp. (MSCC),
down 39.90 at 7.95, said that it expects to report earnings of 4 to 5 cents a
share, compared to the previous expectations
of 9 to 11 cents.

Biotechnology company Neurocrine Biosciences
(NBIX),
up 0.59% at 27.25, announced that a clinical trial of its indiplon-MR tablets
helped elderly people with insomnia.

Be Alert To This Divergence

BUY THE FEAR, SELL THE GREED

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