STOCKS SELLOFF AGAIN WITH BONDS -- THE DOW AND NDX BREAK 50-DAY AVERAGES -- VIX RISES
BOND YIELDS JUMP AGAIN... T-bond and T-note prices fell heavily today, which pushed yields higher. The 10-year T-note yield ended the day at 4.44%. That once again puts yields within striking distance of yearly highs. Yesterday, we showed that yields were testing a three-year down trendline. A new high in yields at this point could have more serious consequences, since it would confirm a major trend reversal to the upside.
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DOW AND NDX BREAK 50-DAY LINES... Stocks took a decided turn for the worst today. Both the Dow and Nasdaq 100 broke their 50-day moving averages. That's the first time that's happened in either average since the spring. That puts the Dow in position to threaten psychological support at 9,000. The Nasdaq 100 also broke chart support at its July low, which turns its short-term trend lower. The biggest NDX loser was Costco.
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COSTCO... Costo tumbled 18% today on massive volume. That help set a gloomy tone for the market and the Nasdaq market in particular. The chart shows an ugly picture. Some other big Nasdaq losers were in the biotech group, which took another hit today. Yesterday, we showed the Biotech Index breaking its 50-day average. Three biotechs -- Chiron, Genzyme, and Medimmune broke their moving average lines today. That also contributed to another bad day in healthcare.
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AETNA LEADS HEALTHCARE LOWER... Aetna was the biggest percentage loser in a weak healthcare group. The health insurer has broken its 50-day average and its June low. And it's done so on very heavy volume. Not good.
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DARDEN RESTAURANTS JUMPS... Some strong news out of the service sector may have given a boost to Darden Restaurants today. The stock jumped sharply -- on good volume -- and closed right at its 200-day moving average. The stock still needs to clear that resistance barrier -- and its June highs -- to achieve a bullish breakout.
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VIX IS JUMPING... Last Friday, we pointed out that the CBOE Volatility Index (VIX) was starting to rise from around the 20 level. We pointed out that a move over its mid-July peak would the first tangible sign of a bottom, which would raise the risk level in stocks. Today's VIX close at 24.1 has exceeded the July peak and is the highest close in more than ten weeks. That's not a good sign for the stock market.
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MONEY MANAGEMENT CLARIFICATION... In yesterday's Money Management update, I apparently confused some members by stating that our remaining long positions were neutral. I was referring to the short-term market trend. We liquidated some long positions during July. As I indicated yesterday, any further deterioration would probably result in our raising more cash. I invite you to read our August 1 (MurphyMorris Money Management) Model Update which has just been posted. It can be found in the yellow box in the upper right corner of the MurphyMorris homepage. The indicators reflect short-term deterioration. That's especially true in the slipping Nasdaq/NYSE ratio, the surge in interest rates, and deterioration in our breath measures. Most of the those indicators have weakened further, including today's Nasdaq 100 break of the 50-day average. Up to today, our indicators weren't too clear as to whether the market was just consolidating its recent gains, or embarking on a more severe corrective action. Today's price action leans the scale toward the latter.
