Two Sectors Ready To Reverse?

May 15, 2002
Daniel Beighley

Price action from the major
averages began the day in negative territory, then pushed higher through the
session before selling off in the last hour-and-a-half. The Dow and S&P 500
closed slightly down, and the Nasdaq slightly up. Telecom, Internet, airline,
and healthcare providers represented the day’s strength, with oil service,
computer hardware, natural gas, and pharmaceuticals taking the biggest losses.

Making a “deadly
doji” candlestick formation on its daily chart, the Semiconductor Index
(
$SOX.X |
Quote |
Chart |
News |
PowerRating), down 0.60%, and the Broker Dealer Index
(
$XBD.X |
Quote |
Chart |
News |
PowerRating),
down 0.02%, closed above their 200-day moving averages. The doji represents
little change in the day’s opening price to close, and is notorious forÂ
precluding reversals.

U.S. Treasury Bonds were
up 8 at 100 ’12.

The highly anticipated earnings
announcement from Applied Materials
(
AMAT |
Quote |
Chart |
News |
PowerRating), up 0.41% at 26.75, aided
the bull’s cause as the company beat analysts’ expectations by a penny.

In economic news, the consumer
price index rose 0.5% as it beat expectations of 0.4%, while its core number
moved up 0.3% vs. the 0.2% expected. Also, industrial production for
April was in line with expectations with a 0.4% increase, with capacity
utilization rising 75.5% vs. the expected 75.6%.

Market breadth was
mostly positive,
with NYSE advancing issues over declining issues by a ratio of 1.12, and down–volume
over up–volume
by a 1.26 ratio. Nasdaq advancing issues over declining issues came in at 1.08,
and up–volume
beat down–volume
by a 1.52 ratio. The
VIX
was up 0.18 at 21.93. The TRIN
was up 0.85 at 1.41.

Above-average volume
had the Dow close just below its 50-day MA,Â as the S&P 500 and Nasdaq
were able to hang on above their 20-day MAs.

Media giant
America Online (AOL),
up 1.61% at 18.85, has been upgraded by Merrill Lynch to “buy” from
“neutral” based on valuation.

Software company BEA Systems (BEAS),
up 2.67% at
11.50%, posted fiscal first quarter
profits that beat analysts’ expectations.

Data storage company Network Appliance
(
NTAP |
Quote |
Chart |
News |
PowerRating), down 16.57% at
15.05, announced that it met its fourth quarter earnings target, though fell
short of revenue expectations and lowered their guidance for the first quarter.
Goldman Sachs also commented that the stock already faces a high valuation.

Also in the data storage sector, QLogic
(
QLGC |
Quote |
Chart |
News |
PowerRating), down 4.76% at
50.19, was downgraded by Bear Stearns to “neutral” from
“attractive.”Â

Computer hardware maker Hewlett-Packard
(
HPQ |
Quote |
Chart |
News |
PowerRating),
down 5.60% at 19.35, met its pro forma earnings expectations, though fell short
of its sales goals.

Auto part retailer Pep Boys (PBY),
down 9.94% at 16.84%, beat analysts’ earnings estimates by reporting profits of
26 cents a share vs. the 22 cents expected.

Healthcare facilities company Universal Health
(UHS),
up 5.51% at 45.90, has been added to Merrill Lynch’s Focus 1 list with the
belief that the company’s strong bottom line growth and upside potential create
attractive valuation.

Biotechnology and drug company Abgenix (ABGX),
down 2.64% at 14.71, announced that its experimental treatment for psoriasis
produced weak results, and also said it is now “less likely” to
achieve its revenue goals for the year.

Two Sectors Ready To Reverse?

BUY THE FEAR, SELL THE GREED

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