DRUG SELLING HURTS HEALTHCARE -- LILLY BREAKS DOWN -- TECHS LEAD BOUNCE -- DOW BOUNCES OFF 10K
HEALTHCARE GROUP IS WEIGHED DOWN BY DRUGS... Healthcare is one of the day's weakest groups. Chart 1 shows the Healthcare iShares in the process of testing their 200-day moving average. Their relative strength line has been dropping since early February. Chart 2 shows that most of selling has been concentrated in the drug group. The AMEX Pharm Holders plunged beneath their 200-day line a couple of weeks ago and have been underperforming the Healthcare iShares. By contrast, biotechs have held up much better. Chart 3 shows the Biotech Holders breaking their 50-day line, but remaining well above the 200-day average. Their relative strength line shows biotechs to be healthcare leaders.
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LILLY DOWN -- MEDIMMUNE IS UP... The differing fortunes between biotechs and drugs is seen in today's stock performance comparisons. The day's weakest healthcare stock is Lilly (a drug stock), which has tumbled below its January low and its 200-day average. Its relative strength line is falling as well. By contrast, MedImmune (a biotech stock) appears to have bottomed during January and has held up relative well since then. It's one of today's strongest healthcare stocks. It should gain some support from any new signs of strength in the biotech group.
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TECHNOLOGY LEADS MARKET BOUNCE -- ENERGY LAGS... A 44 point gain (2.3%) in the Nasdaq is supporting a 123 (1.2%) gain in the Dow and the rest of the market. As was the case yesterday, technology is the day's strongest sector while Energy is the only one in the red. As I suggested yesterday, technology strength and energy weakness is potentially supportive combination for the stock market. Chart 6 also shows the Dow bouncing off "psychological" support at 10,000. Interestingly, two of the Dow's strongest stocks are Intel and Microsoft. One of its weakest is Exxon Mobil. That typifies this week's sector rotation out of energy and into technology.
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