Why Traders Are Watching The SOX

August 23, 2002
Daniel Beighley

The
major indexes sold off heavily today, as price action trended down
for the entire session, with only one weak attempt at a rally in the early
afternoon. The only positive sectors at the close were Internet andÂ REIT
sectors, while semiconductors, networking, computer hardware, and biotechnology
issues experienced the steepest declines.

Today’s close marks five weeks
of consecutive gains for the Dow and S&P 500, while the Nasdaq has been up
three weeks in a row. However, the Semiconductor Index
(
$SOX.X |
Quote |
Chart |
News |
PowerRating),
down 5.87% at 336.27, ended the week in negative territory, as it challenges its
downward channel on the weekly chart, and is showing weakness against the
overall market. We will see how well the sector can hold up next week.

U.S. Treasury Bonds were
up 1 ’03 at 109 ’30.

There were no economic releases today.

Market breadth was negative,
with NYSE declining issues over advancing issues by a ratio of 2.20, and down
volume over up volume by a 5.68 ratio. Nasdaq declining issues over advancing
issues came in at 2.00, and down volume beat up volume by a 3.89 ratio. The
VIX
was up 1.85 at 32.81. The TRIN
was up 2.24 at 2.75.

Below average volume had the Dow, the S&P 500,
and the Nasdaq closing at the bottom of their daily ranges, though above their
50-day SMA’s. The Broker/Dealer Index
(
$XBD.X |
Quote |
Chart |
News |
PowerRating), down 2.47% at
415.81, also closed at the bottom of its daily range.

Financial services company
Citibank (C),
down 3.35% at 34.00, was reported by the Wall Street Journal to be under
investigation by New York Attorney
General
Elliot Spitzer for its methods in obtaining a $45 million financing assignment
from AT&T.

Home improvement retailer Home Depot
(
HD |
Quote |
Chart |
News |
PowerRating), down
0.97% at 33.53, announced that it will begin expensing the cost of its employee
stock options beginning in the year 2003. The company believes the expensing
will have a 2 cent to 3 cent impact on earnings per share.

Media giant AOL Time Warner
(
AOL |
Quote |
Chart |
News |
PowerRating), down 9.31% at
12.76, received negative comments from two major financial papers today. The
Financial Times stated the company is being investigated by the SEC over
profit forecasts made by executives during periods they were selling the stock,
and the Wall Street Journal said it may have to write down tens of
millions of dollars of intangible assets.

Chip giant Intel
(
INTC |
Quote |
Chart |
News |
PowerRating), down 6.21% at 17.96,
had its 2002 and 2003 estimates cut by Bear Stearns is showing weakness at the
mid-quarter point.

Computer hardware company
Tech Data (TECD),
down 2.85% at 34.00,Â beat its second-quarter earnings expectations by 4
cents with a profit of 60 cents per share.

Electric utilities company Duke Energy
(
DUK |
Quote |
Chart |
News |
PowerRating),
down 3.21% at 27.10, was downgraded by CSFB to “hold” from
“buy”.

Aerospace and defense company the Boeing Company
(
BA |
Quote |
Chart |
News |
PowerRating),
down 3.55% at 37.13, received negative comments from S.G. Cowen who said the
company’s 2003 outlook offers more risk than reward based of market and labor
factors.

Tobacco shares were under pressure today on negative
comments from Goldman Sachs who believes there is limited upside for the
industry in the few months, as the premium market continues to decline. The firm
noted Phillip Morris
(
MO |
Quote |
Chart |
News |
PowerRating), down 5.18% at 47.55, as being
“particularly weak. R.J. Reynolds
(
RJR |
Quote |
Chart |
News |
PowerRating), down 2.36% at 56.14.

Book retailer Borders Group
(
BGP |
Quote |
Chart |
News |
PowerRating), up 0.81% at
18.45, beat its second-quarter earnings expectations.

Why Traders Are Watching The SOX

BUY THE FEAR, SELL THE GREED

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