Two Reasons The Trend Could Be Changing

July 25, 2002
Daniel Beighley

Volatility
hit the markets again as price action had the indexes chop to their
intraday highs by 12 pm ET, sell off to the day’s lows by 2:30 pm ET, then rally
again into the close. The Dow finished in the green, while the S&P 500 and
Nasdaq were negative. The biggest winners were in utilities, chemicals,
healthcare, drugs, while the losers were in semis, Internet, networking, and
computer technology.

The Semiconductor Index
(
$SOX.X |
Quote |
Chart |
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PowerRating), down 10.07%, was today’s hot spot as price action fell through
major support on the weekly chart starting from the beginning of the index’s
existence in 1997. This is a red flag for any serious attempts for the overall
markets to rally. New support for the semis index is in the 200 area. Hard to
believe.

U.S. Treasury Bonds were
up ‘8 at 106 ’06.

In economic news, durable orders fell 3.8% in June,
falling well below the anticipated 0.7 increase. The second-quarter
unemployment cost index rose 1%, beating the expected 0.8% increase. Weekly jobless
claims fell by a welcome 21,000, bringing the number to a 17-month low of
362,000. Also, new home sales rose 0.5% in June, to hit a record 1
million while analysts were expecting 978,000. And finally, existing homes fell
11.7% to 5.07 million vs. an expected 5.71 million.Â

Market breadth was negative,
with NYSE advancing issues over declining issues by a ratio of 1.37, and down
volume over up volume by a 1.32 ratio. Nasdaq declining issues over advancing
issues came in at 1.22, and down volume beat up volume by a 5.41 ratio. The
VIX
was downÂ 0.64 at 44.65. The TRIN
was up 1.56 at 1.90.

Heavy volume brought the Dow and S&P 500 close
in “dojis,” while the Nasdaq closed at the bottom of its daily range
just above yesterday’s low. The Broker/Dealer Index
(
$XBD.X |
Quote |
Chart |
News |
PowerRating) down
1.83%, closed in the middle of its daily range.

The world’s biggest chip maker Taiwan Semiconductor
(
TSM |
Quote |
Chart |
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PowerRating), down
18.49% at 9.08, announced that it missed its earnings target.

Biotech company Amgen Inc.
(
AMGN |
Quote |
Chart |
News |
PowerRating), up 13.07% at 41.94, announced
better than expected earnings and increased its outlook for the rest of the
year. The stock was also upgraded by Banc of America Securities and Morgan
Stanley.

Photography company Eastman Kodak
(
EK |
Quote |
Chart |
News |
PowerRating), down 1.02% at 28.10, beat
Wall Street estimates for the second-quarter, and reaffirmed its outlook for the
rest of the year.

Entertainment company Viacom
(
VIA |
Quote |
Chart |
News |
PowerRating), up 2.06% at 35.15, reported
second-quarter profits better than expected, and said it will achieve
double-digit earnings per share for the full year.

Also in the entertainment business, Â America
Online (AOL),
down 15.43% at 9.64, is now under investigation by the SEC for accounting
practices related to its online division.

Biotechnology company Gilead Sciences (GILD),
down 4.44% at 29.05 has beat its second-quarter earnings consensus by 7 cents
with profits of 10 cents per share. Revenues rose 115.8% from a year ago.

Computer services company Electronic Data
Systems (EDS),
up 0.18% at 33.05, has lowered its third-quarter guidance by 5 cents with
anticipated earnings between 74 cent and 75 cents a share.

Communications equipment maker Qualcomm (QCOM),
down 11.95% at 25.62, has been downgraded by UBS Warburg to “hold”
from “buy” based on lower industry demand.

Two Reasons The Trend Could Be Changing

BUY THE FEAR, SELL THE GREED

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