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To: Larry S. who wrote (49853)	11/21/2003 11:51:45 AM
From: Ron McKinnon	Read Replies (2) \| Respond to of 53068

Complacency Comes Back Into Style By John Roque Special to RealMoney.com 11/21/2003 10:48 AM EST Click here for more stories by John Roque Technical Analysis BEARISH The market seems to be topping. Amgen is the poster child for the correction. The S&P 500 could work to 950. Sometimes I can't avoid hearing some of the office talk about fashion trends -- Jimmy Choo, Manolo Blahnik, Burberry, hooded sweatshirts, Ugg boots, fur vests and lower-back tattoos. I don't know much about that, really. I'm much more interested in some of the fashionable market sentiment trends making the rounds lately. Here's a sample of what I'm hearing: "The current corrective phase is going to be shallow." "The economy and company fundamentals are improving, so you've got to buy this pullback." "The employment figures are just turning, and you want to own stocks with growth leverage." "It's just a correction within a cyclical bull market, and we'll make a new high like we've done every other time this year." "The Dow Jones Industrial Average is going to be above 10,000 in December, as it's the seasonally strong period of the year." "You've got to own tech because it always outperforms. The overbought readings aren't going to matter here." "Own stocks leveraged to a weaker dollar because it improves top-line growth." "Lower yields of late are telling you inflation's not going to be a problem and the Fed's going to leave rates alone." "We're heading into the fourth year of a presidential cycle, and there's no way the administration, the Fed and the Treasury will do anything dumb." You get the point. That's what people believe. In short, they're complacent. Here's what I believe: Complacency Comes Back Into Style Page 2 The market is topping. The Nasdaq's gain since its October 2002 low is better than virtually any other "trading range" advance I've studied. It's overbought, into resistance and, as a result, I want to reduce beta and sell stocks that are especially overbought, such as Advanced Micro Devices (AMD:NYSE - commentary - research). Based on a historical study of Intel's (INTC:Nasdaq - commentary - research) price action since the early 1980s, I've found five other instances in which the stock had rallied at least 150% over 269 days. All five of these periods were followed by corrective phases that ranged from -21% to -54%. I'd still want to reduce Intel, and I'm looking for the stock to work to $27.50. This is an unpopular opinion. Related Stories Beware of Sudden Transformations Eating Some Semiconductor Crow S&P 500 Remains the Heart of the Matter Amgen (AMGN:Nasdaq - commentary - research) is, I believe, the poster child for the market correction I envision. Since its peak in July, after rising 137% from July 2002, Amgen has violated every technical "support" trend line, 50-day moving average, support and 200-day moving average. I won't be surprised if the market, in general, behaves this way. Stocks are quickly morphing from Courteney Cox to Courtney Love, and this is not healthy. People keep attributing market weakness to a "buyer's strike" or to redemptions out of Putnam, and they're rationalizing that these factors will end soon. In another sign of a top, the market has been unable to respond well to good news over the past few weeks. According to some, the "fundamental" news is too good to sell. Investors who can short are reluctant to do so. Negative divergences are evident across the board, and weekly indicators are still overbought. The Yankees had better do their darndest to re-sign Andy Pettitte. The lower chart below shows the percentage spread between the S&P 500 and its 50-day moving average. As the chart illustrates, momentum did not confirm the new reaction high(s) in price, which is a negative divergence. There is a trendline break, and an oversold reading for the S&P will not be achieved until the index is about 7% below its 50-day moving average. I firmly believe that the market risk here is not that investors miss a "melt-up," but rather that Amgen represents what will happen in the current correction. I think the S&P will work down to 950. Action in bellwether Citigroup (C:NYSE - commentary - research) is not encouraging; the stock looks poised to break support at $45 and accelerate lower to $40. That would be equivalent to 950 for the S&P. Meanwhile, 1785 would correspond to a near-term oversold level for the Nasdaq. But if I'm right and the S&P works to 950, then the Nasdaq has risk to 1650

To: Larry S. who wrote (49853)	11/21/2003 7:45:09 PM
From: Mark Adams	Read Replies (1) \| Respond to of 53068

The drugs (MRK, SGP, PFE & perhaps others) seemed to stand out as laggards YTD. I don't have any experience or knowledge on how to value them nor the macro circumstances that may be the cause of this. I suspect this sector is probably ripe for some homework. The only other Ute's left on my study list are NST and UIL. I'm thinking I've enough Ute exposure (especially if we are early in the recovery cycle) and losing motivation to get to know these critters. I'd probably not have bothered looking at all except for my effort last week to value ILA.