JOHNSON & JOHNSON LEADS DOW HIGHER AND NEARS 2002 HIGH -- SARA LEE LOSES 7%

SARA LEE FALLS 7% ... Since the start of December, I've highlighted the relatively strong performance of Sara Lee as a leader in the consumer staples group. Just last Thursday I showed the stock breaking out to a new four-year high. Although its quarterly profit came in higher, the company cut its full year earnings outlook. The market didn't like that. The daily bars in Chart 1 show how much the market didn't like it. SLE has plunged 7% today on heavy volume and is threatening its December low and 200-day average near 23. Any way you look at it, that's not good chart action.

Chart 1

JNJ LEADS DOW HIGHER ... One of the drug stocks that I highlighted during December that had leadership qualities was Johnson & Johnson. A positive earnings report has pushed JNJ up 3.5% today to make it the Dow's strongest stock. The drug leader is within a point of a new 52-week high. Its relative strength line has already reached a new high. The weekly bars in Chart 3 show that JNJ is nearing a challenge of its 2002 peak near 65.

Chart 2

Chart 3

DOW REBOUNDS FROM OVERSOLD CONDITION ... The Dow has gained 132 points today. Part of that is probably due to the fact that its daily oscillators are in a short-term oversold condition -- as shown by the daily Commodity Channel Index (CCI) and stochastic lines. Both of those oscillators are in the most oversold position since October. The Dow may also be finding new support along its September/October highs.

Chart 4

DOW HOURLY BARS SHOW IMPROVEMENT...