CONSUMER INDEX TESTING OCTOBER LOWS -- WHAT'S PULLING IT DOWN

CONSUMER INDEX THREATENING OCTOBER LOW... The Morgan Stanley Consumer Index is designed to measure the performance of consumer-oriented, stable growth industries. The major industries are beverage, food, drug, tobacco, and personal product sectors. Normally, this is thought of as a defensive group. At the moment, however, the CMR is threatening to break its October low. If it does, it would be in position to challenge the lows of last July. The trendlines drawn in Chart 1 are converging and have the look of a bearish "symmetrical triangle". The lower trendline drawn under the July/October lows has already been broken. We thought you'd like to see where the weakness is coming from.

Chart 1

ELEVEN STOCKS TRADING UNDER OCTOBER LOWS... Of the thirty stocks in the Consumer Index, we counted eleven that are already trading under their October lows. Of those, the biggest percentage losers since the start of the year are American International Group (-17%), Automatic Data Processing (-15%), McDonalds (-15%), Coca Cola (-9%), Abbott Labs (-8%), Wal Mart (-7%), and Newell Rubbermaid (-7%). All of them fell faster than the Consumer Index which has lost 6.2% this year. Through last night, the Consumer Index had fallen even more than the S&P 500 which is down 4.7%. [The only two consumer stocks to remain in the black this year are Disney (+4%) and Wyeth (.75%). Three others that have held up better than the Consumer Index are Sysco (-l.5%), Sealed Air (-l.5%), and Merck (-4%)].

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