HEALTCHARE GETS HIT HARD AGAIN AS DRUGS AND HMOS FALL ON HEAVY VOLUME -- NASDAQ PULLS BACK ON RISING VOLUME --THAT PUTS UPSIDE BREAKOUT IN JEOPARDY
PRICE OF DEMOCRATIC VICTORY... Yesterday I showed drug stocks selling off on heavy volume. That continued again today and spread to the entire healthcare sector which was the day's weakest group. Chart 1 shows the Health Care Sector SPDR (XLV) not only breaking its 50-day moving average (for the first time in four months), but doing so on very heavy volume. That's a bad combination. Healthcare is one of the groups that stands to lose the most as a result of the recent Democratic victory in Congress. For the second day in a row, the three weakest stocks in the Dow were drugs -- Merck, Pfizer, and Johnson & Johnson. Chart 2 shows Pfizer falling all the way back to its 200-day avaerage. Wyeth was one of biggest losers. Chart 3 shows the stock bearing down on its 200-day line on very heavy volume.
Chart 1
Chart 2
Chart 3
OTHER HEALTCH CARE LOSERS ... Drug stocks weren't the only healthcare losers today. Charts 4 shows Humana tumbling below its 200-day line on rising volume. Chart 5 shows Unitedhealth Group falling to a four-month low on rising volume after falling a test of its 200-day line. If you'll pardon the pun, the healthcare group is starting to look sick. That may have weighed on the entire stock market which gave back some ground today. Unfortunately, today's selling came on higher volume.
Chart 4
Chart 5
NASDAQ PULLS BACK ON RISING VOLUME ... After opening higher today (with a lot of help from Cisco), the Nasdaq Composite succumbed to selling later in the day. Unfortunately, that resulted in a downside day on rising volume. The red candlestick for today means that prices closed lower than their open. In itself, that's not too serious. But it does call into question yesterday's upside breakout above the 2378 level, since prices closed just below that level today. [Remember that a weekly (Friday) close over 2378 is necessary to register a bullish breakout on the weekly bars]. That makes tomorrow an important day for the Nasdaq and the rest of the market. With the market on the defensive, the only winners were energy and precious metals. [Please see my earlier message on those markets].
Chart 6
