Walking Off This Overbought Condition

  • October 29, 2001
  • Daniel Beighley
The bears
ruled the field today, with all major
indexes turning down from the opening bell. The selling was indiscriminate
across the sectors.

 

Larry Connors saw this coming in
This
Week’s Battle Plan commentary over the weekend, where he stated:

“After
this past week’s rally, we are in neutral territory on the weekly charts. On
the dailies, the bias
is slightly lower. The S&Ps are up almost 20% from Sept. 17. It needs to
walk off this overbought condition for a few days, and the daily VIX is
telling us this may be near.”

The
Dow Jones Industrial Average
(
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to close at 9,269.5.
The S&P 500 [$SPX.X| $SPX.X] dipped 2.19%, closing at
1,080.41, while the Nasdaq
[$COMPQ.X |$COMPQ.X] finished down 3.92%
at 1,699.58.

Market
players remained cautious this Monday, ahead of key economic data to be released
this week. Consumer confidence figures will be released Tuesday,  third
quarter GDP will be released Wednesday, and employment statistics will be
released Friday. While the markets have rallied nicely in the past weeks, there
is still much uncertainty over the future of the economy.

NYSE
advancing issues were 1,024,
with up-volume at 213,652,016;
declining issues were 2,072,
with down-volume at 879,741,760.
Nasdaq advancing issues were 1,244,
with up-volume at 274,118,592;
declining issues were 2,363 with
down- volume at 1,344,288,640.
The VIX
was up 1.86  to 32.39. The TRIN
was up 1.15  to 2.04. Less-than-average
overall volume suggests a lack of conviction for the bears while profit-taking
on recent gains was inevitable. On the other hand, large percentage drops on the
major indexes indicates a condition that may be more than just a healthy
pullback.  Of the three indexes, only the Nasdaq was able to close above
its 50-day MA.

Top
sectors of the day included the Gold
And Silver Sector Index
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rising 0.17% to finish at 53.03.

Losing
sectors were the Semiconductor
Sector Index
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at 447.21, and the Morgan
Stanley Internet Index
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down 5.72% at 11.2.


EchoStar
(
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finished down
4.55% at 24.11.
GM announced today it will sell its Hughes Electronics subsidiary to EchoStar
for $26 billion.

FedEx
Corp
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gained 3.50% at 40.86. The
company announced it would surpass most Wall Street estimates for 2nd Qtr fiscal
earnings claiming the September 11 attacks were not as damaging as believed.

Enron
Corp
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sank
8.96% at 14.02.
Shares hit a seven year low today after it was announced the company was
seeking an extended credit line. As North America’s largest natural gas and
electricity trader shares have droped over 50% in the last two weeks.

Humana Inc.

(
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was up 1.70%
, closing at 11.39. The health insurer announced earnings of 18 cents a share,
up from 14 cents a year ago. This was a 30% rise in earnings, but revenue
shrank.  Analysts were expecting 17 to 19 cents a share.

Lockheed
Martin

(
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48.95,
 won the largest defense contract ever over rival Boeing
(
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SureBeam Corp

(
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jumped 12.75% to 14.94. Shares
of the company surged on news of a contract with the U.S. Postal Service to
supply electron beam systems to eliminate harmful bacteria.