Aces Back to Back
The Dow finished the week down 373 points while the Nasdaq 100 NDX finished down 77.Overall 3 sectors were up and 31 were down. Action for the week was minus 2256. The NDX is108% oversold and under its projected price giving current volatility and price actionassumptions. My old partner Jim Yates used to call this an ‘Aces back to back’opportunity. The best cards to be dealt in poker. You can still lose the hand but it is agood bet to start with.
The reason for the extreme numbers can be blamed on the FOMC comments however this marketwas already in a down trend as noted in last weekends letter. Simply the Oil Patch hadtopped out and the only new sector showing upside leadership was Pharmaceutical DRG. Thisweek we have Intels earnings which is the obvious bellwether for the tech stocks. Youcannot underestimate the importance of sector analysis in a rotating market such as this.
Rydex funds- Nibbled at the bullish Dow fund expecting some sort of bounce this week. TheNDX looks like a better bounce than the blue chip S&P or Dow and we will adjustaccordingly.
INTERMEDIATE TERM TRENDS NDX SPX Flat to down
INTERMEDIATE OSCILLATOR Very Oversold
Pharmaceutical DRG- Still number one overall with a gain last week. The strongest stocksinclude Abbot ABT and Lilly LLY. We still like and own Wyeth WYE.
Utility UTY- Still second in rank led by Texas Utilities TXU. We want tobe buying Duke DUK, Southern Co. SO and Edison ED. We think the FOMC will not be asaggressive as the market thought last week.
Biotech BTK- Catching up to the DRG sector quickly with a big move fromGenentech DNA which also saved our sector portfolio. It is nice to own the big winner ofthe week in times of panic. We would not chase it here but keep and eye on others likeAffymetrix AFFY.
Semiconductors SOX- Technology is very oversold now and the Semis are atbargain prices. Marvell MRVL, Applied Materials AMAT and Novellus NVLS are the ones towatch along with Intels INTC earnings this week.
Telecom XTC- We think recent market volatility will make it more likelyVerizon VZ will acquire MCI at a reasonable price.
Financials BKX, XBD and SMQ- In the tank recently. We need to see thesesectors climb out of the bottom ranks.
| Broad Based | Symbol | Close | Wkly chg | %Ovrb/s | ||
| Volatility | VIX | 17.74 | 5.12 | 141 | ||
| Dow Commodities | &AIG | 152.89 | -3.84 | -3 | ||
| Thirty Year Rate | TYX | 46.27 | -1.48 | -15 | ||
| Midcap | MID | 627.38 | -28.19 | -74 | ||
| SP 100 | OEX | 547.25 | -14.93 | -84 | ||
| Institutional | XII | 567.9 | -15.59 | -88 | ||
| Small Cap | SML | 303.41 | -15.84 | -90 | ||
| SP 500 | SPX | 1142.62 | -38.58 | -95 | ||
| Dow Jones Industrial | DJIA | 10087.51 | -373.83 | -98 | ||
| Nasdaq 100 | NDX | 1408.59 | -77.01 | -108 | ||
| Rank | Sectors | Chg Rank | Symbol | Close | Wkly Chg | %Ovrb/s |
| 1 | Pharmaceutical | 0 | DRG | 331.44 | 11.03 | 82 |
| 2 | Utility | 2 | UTY | 391.08 | -4.55 | 13 |
| 3 | Biotech | 12 | BTK | 513.74 | 4.52 | 6 |
| 4 | Airline | -2 | XAL | 48.23 | -2.38 | 1 |
| 5 | Gaming | 7 | SGV | 142.28 | -4.45 | -6 |
| 6 | Oil | -1 | XOI | 802.53 | -50.06 | -7 |
| 7 | Natural Gas | -1 | XNG | 304.08 | -21.03 | -18 |
| 8 | Defense Industry | -5 | DFI | 877.25 | -42.05 | -24 |
| 9 | REIT | 16 | NLR | 113.71 | 0.75 | -27 |
| 10 | Consumer | 1 | CMR | 578.96 | -5.09 | -28 |
| 11 | China | -3 | CZH | 94.59 | -4.07 | -34 |
| 12 | Oil Service | -5 | OSX | 129.67 | -9.03 | -34 |
| 13 | Service | -4 | GSV | 128.51 | -3.86 | -65 |
| 14 | Housing | 0 | HGX | 453.43 | -26.15 | -65 |
| 15 | Banking | 14 | BKX | 94.54 | -2.05 | -70 |
| 16 | Gold/Silver | 3 | XAU | 86.39 | -6.50 | -72 |
| 17 | Semiconductor | -4 | SOX | 382.64 | -34.31 | -73 |
| 18 | Basic Materials | -8 | XLB | 27.52 | -2.47 | -77 |
| 19 | Dividend Yield | -3 | DVY | 58.11 | -1.82 | -77 |
| 20 | Wireless | 1 | WMH | 52.07 | -1.78 | -80 |
| 21 | Telecom | 2 | XTC | 647.85 | -25.85 | -84 |
| 22 | Transportation | -4 | IYT | 60.8 | -3.92 | -84 |
| 23 | Insurance | 8 | KIX | 126.69 | -3.63 | -84 |
| 24 | Networking | 4 | NWX | 187.98 | -15.24 | -92 |
| 25 | Broker/Dealer | 2 | XBD | 138.08 | -6.59 | -98 |
| 26 | Retail | 8 | IRH | 88.87 | -2.67 | -104 |
| 27 | Investment Mgmt | 6 | SMQ | 393.32 | -21.10 | -108 |
| 28 | Computer Software | 4 | GSO | 148.72 | -7.06 | -110 |
| 29 | Disk Drive | -5 | DDX | 100.77 | -11.98 | -115 |
| 30 | Internet | -4 | DOT | 174.51 | -10.34 | -115 |
| 31 | Computer | -9 | XCI | 637.65 | -40.78 | -128 |
| 32 | Cyclical | -2 | CYC | 692.85 | -49.95 | -131 |
| 33 | Cable | -13 | SCQ | 323.89 | -12.15 | -135 |
| 34 | Technology | -17 | TXX | 535.47 | -42.47 | -152 |
