PLUNGE IN PFIZER UNSETTLES DRUG ETFS -- BUT MOST DRUG LEADERS ARE HOLDING UP OK

PFIZER PLUNGES 14%... Today's news that Pfizer's drug Celebrex may increase the risk of heart attacks took the stock -- and the drug group -- completely by surprise this morning. Chart 1 shows today's plunge to a new low by Pfizer. Several other drug stocks are showing some losses as well, although the damage to those stocks is much less severe. Some are even trading higher. But the Pharma Holders (Chart 2) and the Healthcare Select Sector SPDR (Chart 3) are also coming under heavy early selling. The main reason for that is that Pfizer is by far the biggest holding in both ETFs (26% in the PPH and 19% in the XLV). That carries good and bad news. The bad news is that Pfizer's plunge is having a disproportionate effect on the two ETFs. That's also the good news. Most of the drug leaders that I showed yesterday are holding up pretty well. Two are actually rising.

Chart 1

Chart 2

Chart 3

ABBOTT LABS AND JNJ ARE UP TODAY ... Yesterday's market message showed these two drug leaders that have attractive long-term chart patterns. Both are trading higher this morning in the face of Pfizer's bad news. I take that as a good sign for both stocks -- and possibly for the group in general.

Chart 4

Chart 5

BMY AND SGP HOLD OVER BREAKOUT POINTS... Two other drug leaders that I showed yesterday are down in early trading, but are holding over chart support. The daily charts of Bristol Myers Squibb (Chart 6) and Schering Plough (Chart 7) show them still trading over their breakout points at their mid-September highs (see circles)and trying to recover from today's early drop. As long as today's early lows aren't broken, any short-term chart damage to their charts will be contained. For the group in general, a lot may depend on how they close today. Although Pfizer is the biggest of the drug stocks, it's still only one stock. I suspect this morning's price plunge in that stock -- and the drug group -- was an overreaction to one piece of bad news. A lot may depend on whether or not the group is able to bounce back this afternoon -- or over the next few days.

Chart 6

Chart 7