HEALTHCARE CONTINUES TO ATTRACT NEW MONEY -- BIOGEN IDEC AND JOHNSON & JOHNSON ARE LEADERS -- THREE NEW ONES ARE ABC, BCR, AND VAR -- HOUSING AND FINANCIAL GROUPS LEAD MARKET LOWER -- DOW BACKS OFF FROM INITIAL RESISTANCE BARRIERS

HEALTHCARE SPDR SHOWS RELATIVE STRENGTH ... Healthcare remains the only defensive group showing relative strength. Chart 1 shows the Health Care SPDR (XLV) moving up to challenge its spring highs. Its relative strength line (below chart) is much more impressive. The RS turned up during May (when the last market rally peaked) and has been rising since then. We've pointed out before that much of the healthcare strength was coming from biotechs and a couple of big pharmas. That's still the case. On July 15, I showed Johnson & Johnson challenging its old highs. Chart 2 show JNJ having exceeded those highs. One of the biotech stocks on the monthly leader board is Biogen Idec. Chart 3 shows that stock having broken out to a seven month high. Its RS line is at a new 52-week high. Today's leader board shows three more potential leaders.

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ABC, BCR, AND VAR SURGE... Three stocks are leading today's healthcare group higher. All are the result of positive earnings reports. Chart 4 shows AmerisourceBergen surging 9% and trading above its 200-day average for the first time in six months. Its RS line (below chart) appears to have bottomed as well. Chart 5 shows Bard climbing to a new two-month high today. Its RS line has been climbing since mid-March. The stock is now safely back over its 200-day average as well. Chart 6 shows the strongest chart pattern of the three. Varian Medical Systems has gapped up 12% today to reach the highest level in two years. VAR is nearing a test of its early 2006 high. Its RS line is doing the same. With other previous safe havens (like gold and utilities) tumbling over the past week, healthcare is one of the few groups still attracting defensive funds.

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MORE BAD HOUSING NEWS ... Sales of previously owned homes fell in June to the lowest level in a decade. That news is pushing the PHLX Housing Index (HGX) down 4.5% today and helping drag the rest of the market down with it. Chart 7 shows the HGX backing off from its 50-day average and initial chart support along its January low near 120. That's a logical spot to expect new selling to emerge. Financials are leading the market lower as well. Chart 8 shows the Financials SPDR (XLF) also backing off from its 50-day average and initial chart resistance along its March low. That's putting the recent market rebound in jeopardy.

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DOW BACKS OFF FROM MARCH LOW... Chart 9 shows that the Dow Industrials are starting to back off from two potential resistance levels. One is the upper Bollinger band. The other is its January/March lows. This is the first real test of the staying power of the recent rebound. If the rebound is nothing more than an oversold bounce, this would be a logical spot for some selling to re-appear. And it appears to be doing so.

Chart 9