APPLIED MATERIALS PULLS SOX LOWER -- NASDAQ DROP UNDERMINES BLUE CHIP RALLY -- CONSUMER STAPLES GAIN GROUND
AMAT STOCK FAILS BADLY -- PULLS SOX LOWER... The sharply higher opening in Applied Materials this morning was the big news in a bouncing SOX Index and a higher Nasdaq opening. By day's end, things had turned ugly. Chart 1 shows AMAT closing lower after jumping all the way to 24 this morning. The dramatic downside reversal also took place on very heavy volume. That's very bad technical action. The SOX followed the stock lower. Chart 2 shows the Semiconductor (SOX) suffering a downside reversal day as well. That undermined the early Nasdaq bounce.
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NASDAQ 100 LEADS MARKET DECLINE... The Nasdaq 100 fell 1.51% today and was the day's worst performer, reflecting heavy tech selling in the Nasdaq market. The QQQ fell on heavy volume and is once again threatening its 50-day moving average. The Russell 2000 was another big percentage loser today, reflecting selling in small caps. The blue chip averages fared a little better. The Dow and the S&P 500 were testing their old highs as the Nasdaq started falling. As a result, both blue chips average fell on rising volume. We've said many times before that Nasdaq weakness isn't good for the rest of the market. The failure of the blue chip averages to close in new high ground keeps them locked in their February trading range. More selling is likely tomorrow.
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CONSUMER STAPLES GAIN GROUND... As the market turns more defensive, money has been moving toward consumer staples. That was the case again today. Three of the consumer staples leaders were Safeway, Sara Lee, and Kimberly Clark. All three gained ground on rising volume. Safeway hit a four-month high. Sara Lee is close to a 52-week high. KMB hit a new 52-week high. Notice that the relative strength line of all three stocks are starting to rise. That's where some of the money coming out of the technology sector is going. Energy also gained ground today as crude oil prices hit $36. Paper stocks led a bounce in the materials sector.
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