FINANCIALS LEAD MARKET LOWER AGAIN -- S&P 500 EMA TREND IS STILL DOWN -- GOLD STOCK ETF BREAKS OUT -- CELGENE AND GENZYME ARE BIOTECH LEADERS -- VIX STILL NOT HIGH ENOUGH TO SIGNAL A BOTTOM

REGIONAL BANKS TUMBLE ... The rout in financial shares continues. Chart 1 shows Bank Regional Holders tumbling to the lowest level in six years. That contributed to more big losses in the entire financial sector. Chart 2 shows the RHK bearing down on its 2002 lows. As has been suggested herein many times, the market decline is likely to continue until the financial sector stabilizes. So far, there's no sign of that happening.

Chart 1

Chart 2

S&P 500 EMA DOWNTREND IS STILL INTACT ... One of the best ways that I know of to measure the trend of the S&P 500 is with a 13 and 34 period exponential moving average combination. Chart 3 shows the short-term trend turning negative over a month ago. And it's still down. The spread between the two EMA lines (below chart) is still dropping as well. The weekly EMA combination, which measures the longer-term trend, turned negative last December and has been negative ever since. The weekly bars in Chart 4 show the S&P 500 bearing down on its spring 2006 lows at 1219. None of that is very encouraging.

Chart 3

Chart 4

GOLD STOCKS BREAK OUT ... Bullion achieved a bullish breakout a couple of weeks ago (Chart 5). Gold stocks followed suit today. Chart 6 shows the Market Vectors Gold Miners ETF (GDX) closing above its May/June highs near 50. Its relative strength line has been climbing over the last month. Gold has become one of the market's few safe havens.

Chart 5

Chart 6

SOME HEALTHCARE LEADERS ... Arthur Hill has been pointing out recent leadership in the defensive healthcare sector. He focused last week on biotechs in particular. On July 3, I highlighted Amgen as one of the leaders in both groups. Here are two more. Chart 7 shows Celgene trading at the highest level in nine months. Its relative strength line (below chart) has climbed sharply as well. Chart 8 shows Genzyme reaching a five-month high. Its RS line has already reached a new high. The monthly bars in Chart 9 show Genzyme spending the last two years consolidating just above its 2001 peak at 64. Its relative strength line has just hit a new record. The stock price may not be far behind.

Chart 7

Chart 8

Chart 9

VIX STILL ISN'T HIGH ENOUGH ... My July 1 Market Message expressed the view that the CBOE Volatility (VIX) Index hadn't risen far enough to signal a bottom. It still hasn't. Chart 10 shows the VIX closing above 28 today which is the highest close in four months (red line). The chart shows the VIX climbing over 30 four times in the last year. Each one of those four peaks produced a market bounce (see green line). The March rally began from a VIX reading over 32. That suggests that the VIX still has further to climb. Until the VIX reaches those higher levels (and turns down), the market will most likely continue to weaken.

Chart 10