HOMEBUILDERS SEE SOME HEAVY - VOLUME SELLING; GOLD HEADING TOWARD $325-330 SUPPORT
BIG DROP IN NEW HOME SALES CAUSES SELLING IN HOMEBUILDERS... New home sales saw the biggest drop in nine years. Not surprisingly, that weak number caused some selling in homebuilders today. The selling also came on fairly heavy trading, which is always a cause for concern. Chartwise, homebuilders are also up against formidable overhead resistance barriers -- and are showing some technical deteriotation. Chart 1 shows Pulte Corp struggling with chart resistance in the low 50s. On top of the chart, we can also see the 14-day RSI starting to drop. Even more disturbing is the on-balance volume line under the chart. It's much closer to its lows than its highs. That not a good sign. Chart 2 shows Ryland in pretty much the same situation. Ryland also looks to be failing at its 200-day moving average. The charts suggest more caution on housing.
Chart 1
Chart 2
COMCAST RALLIES... Comcast Corp. was one of the Nasdaq's biggest winners today. The stock is trading over both moving average lines. Today's price surge (on higher volume) puts the stock on the verge of a breakout to an eight-month high.
Chart 3
FIRST TENNESSEE BREAKS OUT ON VOLUME... In a relatively strong financial group today, the standout was First Tennessee Natl. Corp. The stock broke through resistance to achieve a six-month breakout. The big volume bar shows impressive upside volume. Chart 5 shows the financial leader also breaking a down trendline drawn along its May/August high. The next upside target is last year's highs around 40.
Chart 4
Chart 5
WATSON PHARMACEUTICALS GETTING BETTER... Healthcare stocks had a good day. One of the better looking charts belongs to Watson Pharmaceuticals. The stock gapped up today on very heavy volume. A close above its January high would put the stock at the highest level in a year. The weekly chart has the appearance of an inverse "head and shoulders" bottom -- with a "neckline" drawn over the highs of the past year. A new high for this year would also break the neckline.
Chart 6
Chart 7
GOLD LOSES ANOTHER $8.00 -- WHERE'S THE SUPPORT?... Gold fell again today to end at $346. It appears that gold will retest initial chart support at last weeks's low near $340. That, however, doesn't strike us as a particularly important support level. The weekly chart shows why. During the fourth quarter of last year, gold broke through resistance near $330 (see flat line). We wouldn't be surprised to see gold drop to that level. There's another reason why the $325-330 region represents major support. The monthly chart shows the 1999 peak at $325. If the gold breakout is for real (and we think it is), prices shouldn't drop below that breakout point.
Chart 8
Chart 9
