Will The Dough Roll Into The Dow?
Big-picture breakdowns of head-and-shoulder patterns in the S&P 500 and
Nasdaq below their 50-day moving averages are setting an ominous tone. But the
Dow has yet to roll over as convincingly and is tracing a reversal bar at a
critical juncture, providing some support to the broad market. That the market
is holding up in the face of one of the heaviest bearish news days in recent
memory appears demonstrative of “sell the news, buy the rumor”
trading, characteristic of a downswing.
The Dow is up 7 at 10,697, the Nasdaq is down 5.39 at
2036.68, and the S&P 500 is down 1.73 at 1218.28.
The Dow recovered from early losses, finding support at
the confluence of its 50-day moving average and the 38.2% Fibonacci retracement
of its April swing low to May high rally. This is a typical location that
institutions will come in and support an index (or stock) and is resulting in a
lizard tail, the name for a reversal bar coined by Jeff Cooper.
Hewlett-Packard
(
HWP |
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PowerRating) popped open and is the biggest
gainer on the Dow, up 4% at 27.89 and is providing some palliative support to
the broad tech sector.
JP Morgan
(
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Dow’s comeback, responding to its own lizard tail from two days ago, which
coincided perfectly with the 61.8% Fib retracement of its spring run. JPM is up
2.78% at 44.80.
Johnson & Johnson
(
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PowerRating) is another of the more
robust components of today’s Dow, up 2.2%. JNJ’s chart shows a constructive
upper-level cup and handle out of its bigger-picture cup and handle and is
trading on its high of the session and is poised to close at its highest point
of 2001.
McDonalds
(
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PowerRating) was among the stocks casting a cloud
of negativity over the market today. The hamburger chain said its Q2 would fall
because of weakness in overseas currencies and the mad cow disease scare.
But really shaking up the market and highlighting
continuing problems and the likelihood of more downside in the communications
sphere, Nortel
(
NT |
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PowerRating) said it will have its largest loss ever next quarter,
forecasting a $19.2 billion loss and 10,000 layoffs.
JDS Uniphase
(
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PowerRating), the largest maker of fiber
optics, also guided lower and was downgraded by multiple brokerages and pundits.
JDSU is trading at a 27-month low, down 12% at 12.11, but is setting up a weekly
Turtle Soup Plus One Buy signal
Demonstrating global weakness, Phillips, the number one
consumer electronics concern in Europe, said it would post its first annual loss
in five years and cited weakness in its semis business.
Notice that biotech
(
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PowerRating) is now the second strongest
sector on the session (behind utilities). Perhaps more importantly, see how
players came in to support it at the confluence of the 38.2% Fib retracement of
its March-June run and its 50-day MA line. BTK is now up 2.05%. One way to get a
handle on the strongest sectors is to look at the Funds section (tab) of
TradingMarkets. Notice that the top one-month
RS exchange traded funds (ETF) are the biotech HOLDR
(
BBH |
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PowerRating) and the newer
Nasdaq biotech fund
(
IBB |
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PowerRating).