What’s Needed For Follow-Through

July 12, 2002
Daniel Beighley

Price
action on the major averages traded down off the bell, then shot up
to the day’s highs by 11:00 AM ET, before establishing a downtrend that lasted
into the close. The leading sectors of the day were biotechnology, telecoms,
computer hardware, and healthcare, while utilities, retail, banks, and oil
issues were the hardest hit.

The markets failed to provide
follow-through from yesterday’s session, and despite the oversold conditions
mentioned by columnists throughout this site, all major averages closed negative.

Dave Landry‘s big blue arrow remains down, and until we see the buying
conviction stick around for more than a day or two, we shouldn’t believe
otherwise.

U.S. Treasury Bonds were
up ‘5 at 105 ’08.

In economic news, retail sales weighed in with a
1.1% rise for June, beating estimates of 0.6%, though the University of
Michigan’s consumer sentiment index dropped to 85.5 in July, down from
92.4 in June to give investors something to fear.Â

Market breadth was mostly
negative, with NYSE declining issues over advancing issues by a ratio of
1.43, and down volume over up volume by a 1.15 ratio. Nasdaq declining issues
over advancing issues came in at 1.16, and up volume beat down volume by a 1.30
ratio. The

VIX was down 0.55 at 38.09. The

TRIN was up 0.32 at 0.83.

Above-average volume had the Dow take out
yesterday’s low as it closed in the lower half of its daily range, the S&P 500
and the Nasdaq traded in a narrow ranges. The Semiconductor Index
(
$SOX.X |
Quote |
Chart |
News |
PowerRating),
up 1.25%, was just short of its 20-day MA at its high today. The
Broker/Dealer Index
(
$XBD.X |
Quote |
Chart |
News |
PowerRating), down 0.06%, closed in a “doji”
formation.

Computer hardware maker Dell Computer (DELL),
up 4.55% at 25.02,Â revised its second-quarter earnings upwards by a penny, and
has been upgraded by Lehman Brothers to “buy” from “market perform,” based on
bottoming in IT demand in the third-quarter and a positive outlook for 2003.

Conglomerate General Electric (GE),
up 4.57% at 28.60,Â announced that its second-quarter earnings jumped 14%, which
was aided by a settlement from the Internal Revenue Service.

In the chip sector Intel Corp.
(
INTC |
Quote |
Chart |
News |
PowerRating), down 1.42% to 17.99,
received negative words from UBS Warburg who lowered its estimates on the
company for 2002 and 2003 due to a more modest processor shipment outlook.

Energy company Duke Energy
(
DUK |
Quote |
Chart |
News |
PowerRating), down 111.44% at 24.75, was down
after it announced it has received subpoenas for information on its alleged
round-trip trades.

Home improvement retailer Home Depot (HD),
down 7.35% at 29.09, was downgraded by Merrill Lynch to near-term “neutral” from
“strong buy” based on competition from Lowes and under performing against other
retailers.

Also in the home improvement business, Lowes
(LOW),
down 6.99% at 40.18, was downgraded by Jeffries to “hold” from “buy,” based on
valuation and concerns that the real estate boom will not be able to sustain the
growth in home remodeling.

Food processing company Kraft Foods
(
KFT |
Quote |
Chart |
News |
PowerRating),
down 2.67% at 35.99, has been upgraded by CSFB to “strong buy” from “buy” due to
valuation. The firm has a price target of $50 on the stock.

What’s Needed For Follow-Through

BUY THE FEAR, SELL THE GREED

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