IBM AND TXN BOUNCE NOT ENOUGH TO OFFSET PLUNGE IN MATERIALS AND HEALTH INSURERS

IBM AND TXN LEAD TECH BOUNCE... First the good news. Positive reports from IBM and Texas Instruments are pushing both stocks higher and are giving a boost to the technology sector and semiconductors in particular. Chart 1 shows Big Blue gapping up to a new four-month high on rising volume. It's also on the verge of challenging its 200-day moving average. That's strong chart action. Texas Instruments also gapped up this morning, but not as dramatically. Chart 2 shows the chip leader having bounced twice off its 50-day moving average, before moving higher today on rising volume. Its relative strength line bottomed over a month ago. Three of the top S&P 500 gainers today are chip related -- TXN, National Semiconductor, and Advanced Micro Devices. Unfortunately, tech gains are being more than offset by a plunge in healthcare insurers and more selling in basic material stocks. Paper and steel stocks are falling.

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PAPER AND STEEL LEAD MATERIALS LOWER... The heavy selling that hit basic materials stocks last week is continuing. The Materials Select Sector SPDR is breaking is 50-day average today. Its relative strength line continues to drop, which reflects loss of market leadership. Paper stocks led the selling yesterday. Steel stocks are falling today along with the papers. Nucor has broken its 50-day line on rising volume. US Steel is breaking its 200-day line. The biggest S&P 500 percentage loser is from the paper group. Chart 6 shows Boise Cascade tumbling 12% on rising volume and undercutting its summer low. It's tough for the market to withstand that kind of selling from former leaders. But that's not all the market has to worry about today. Health insurers are falling even harder.

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HEALTH INSURERS TUMBLE ... Heavy selling in the insurance industry has spread to health insurers in a big way. Three of the day's biggest casualties are Aetna (-10%), Cigna (-9%), and UNH (-8%). The chart damage pretty much speaks for itself and it's pretty extensive.

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S&P 500 SPDR RALLY FADES... After a tech-inspired rally this morning, the S&P 500 SPDRs are trading back below their 50-day moving average. The heaviest selling is concentrated in basic materials and healthcare. Four of the top five S&P percentage losers are Boise Cascade, Aetna, Cigna, and Nucor with average losses of nearly 10%. It's pretty tough for the market to withstand that kind of selling.

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