Watch These Indicators For Market Direction

May 16, 2002
Daniel Beighley

The
markets traced out choppy patterns in narrow ranges for the session,
with the three major indexes closing slightly positive. Internet, telecoms, gold
and silver, and oil issues rounded out the the biggest gainers list, with
biotechnology, utilities, and healthcare stocks deepest in the red.

The VIX, which is a measure of
the S&P 100 options volatility, dropped 4.65% to close below its 50-day
moving average, indicating complacency in the market. Our market
bias page contains several indicators derived from the VIX that are
worth keeping an eye on for future signals.

U.S. Treasury Bonds were
up 16 at 100 ’28.

In economic news, jobless claims increased 2000 to 418,000, beating
the consensus estimate of 405,000. Housing starts declined 5.4% to 1.555
million, with building permits rising 0.3% to 1.634 million. Many have
interpreted the housing data as a negative, though Tony
Crescenzi illustrates how the numbers may be misleading,
in his latest article.

Market breadth was mixed,
with NYSE declining issues over advancing issues by a ratio of 1.22, and down
volume over up volume by a 1.00 ratio. Nasdaq declining issues over advancing
issues came in at 1.22, and up volume beat down volume by a 1.87 ratio. The
VIX
was down 1.03 at 21.10. The TRIN
was down 0.60 at 0.81.

Below-average volume
put the Dow back above its 50-day MA,Â as the S&P 500 and Nasdaq both
made their third consecutive closes above their 20-day MA’s. The
Semiconductor Index
(
$SOX.X |
Quote |
Chart |
News |
PowerRating), up 0.91%, closed at the top of its
range after testing below its 200-day MA. The Broker/Dealer Index
(
$XBD.X |
Quote |
Chart |
News |
PowerRating),
up 0.80%, made its third consecutive close above its 200-day MA.

Biotechnology company
Imclone Systems (IMCL),
down 13.22% at 13.06, reported a first-quarter loss of 41 cents a share vs. the
loss of 34 cents a share expected.

Drug maker Pfizer (PFE),
down 1.83% at 35.82, announced that the U.S. Justice Department’s investigation
into the pricing of its drug Lipitor covers a wider time frame than previously
understood. It was also reported that several state attorneys
general are reviewing the marketing of its epilepsy drug Neurontin and may
seek civil damages.

Biotechnology company Biogen (BGEN)
is down 3.36% at
40.55, despite a positive article on the company in Business Week. This
morning’s decline may be attributed to comments form the research firm Leerink
Swan which claims the FDA will likely require further testing of its cancer drug
Amevive.

Software company Intuit Inc. (INTU),
down 0.62% at 43.22, posted earnings of 67 cents a share. Excluding
acquisition-related costs and other expenses, the company would have earned 75
cents a share vs. the 72 cents expected by analysts.

Software company Citrix Systems (CTXS),
up 8.21% at 12.38, said it has reached an agreement with Microsoft to have
access to its Windows server code for three
years.

Clothing retailer Ann Taylor (ANN),
up 0.41% at 48.94, posted earning in line with expectations after the close
Wednesday, and was downgraded by Merrill LynchÂ to near-term
“buy” from “strong buy.”

Investment services company Instinet Group
(
INET |
Quote |
Chart |
News |
PowerRating), up 10.71% at
7.75, was reported by the Wall Street Journal to be in talks to purchase
privately owned Island ECN for over $500 million.

Data storage company Brocade Communications
(
BRCD |
Quote |
Chart |
News |
PowerRating), down 3.23% at
22.75, posted second-quarter earnings in line with expectations as it pulled in
more revenue than anticipated. The company said it expects third-quarter revenue
to be higher than previously predicted.

Watch These Indicators For Market Direction

BUY THE FEAR, SELL THE GREED

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