What The VIX Is Telling You

July 10, 2002
Daniel Beighley

Selling
dominated the trading for the third day in a row, with the major
indexes holding downtrends for the entire session.

The Volatility Index
(
$VIX.X |
Quote |
Chart |
News |
PowerRating) shot up to a level not seen since last September. Extreme
readings of this indicator are often precursors to short-term changes in trend.
(Larry
Connors has made a science out of the VIX, monitored on the market
bias page.)

U.S.
Treasury Bonds were up ’31 at 104 ’25.

In economic news, wholesale
inventories rose in May by 0.1% for the first increase since May of 2001.
April’s wholesale inventories were revised to show a decline of 0.9% vs.
the previous estimate of a 0.7% decline.

Market
breadth was negative, with NYSE declining issues over
advancing issues by a ratio of 3.22, and down volume over up volume by a 3.38
ratio. Nasdaq declining issues over advancing issues came in at 2.13, and down
volume beat up volume by a 2.81 ratio. The
VIX
was up 3.10 at 65.22. The TRIN
was down 0.76 at 1.54.

Above-average
volume on the NYSE and average volume on the Nasdaq on
the session moved the Dow down to a level not seen since last September, S&P
500 to a close not seen since November of 1997, and the Nasdaq to its lowest
close since April of 1997. The Semiconductor Index
(
$SOX.X |
Quote |
Chart |
News |
PowerRating), down
3.84%, closed at the bottom of its daily range, just above lows made last week.
The Broker/Dealer Index
(
$XBD.X |
Quote |
Chart |
News |
PowerRating), down 2.23%, made its lowest
close since October of last Fall.

Communications
services company Qwest Communications
(
Q |
Quote |
Chart |
News |
PowerRating), down 31.92% at 1.77,
announced that they are under criminal investigation, though did not disclose
the subject of the investigation.

Shipping company
United Parcel Service
(
UPS |
Quote |
Chart |
News |
PowerRating), up 4.13% at 63.25, has been upgraded by
Deutsche Securities to “strong buy” from “buy.” The company
has been added to the S&P 500, and has reaffirmed its second-quarter
guidance. The company also warned that it is seeing weak volume as business goes
to their competitors amid labor negotiations.Â

Computer hardware
maker International Business Machines
(
IBM |
Quote |
Chart |
News |
PowerRating), down 1.30% at 68.76, has
had its price targets cut by Bank of America to $90 a share from $100 a share
based on the discontinued hard drive business and weak environment.

Communications
equipment company ADC Telecommunications
(
ADCT |
Quote |
Chart |
News |
PowerRating), down 6.30% at 2.08,
warned that their fiscal third-quarter earnings will fall come in lower than
expected due to a weak capital spending market.

Internet
infrastructure company Cisco Systems
(
CSCO |
Quote |
Chart |
News |
PowerRating), up 2.81% at 13.51, has
been upgraded by Merrill Lynch to “strong buy” from “buy”
based on fundamentals and expects to see revenue and EPS out-performance by year
end.

What The VIX Is Telling You

BUY THE FEAR, SELL THE GREED

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