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While plenty of support levels were broken today, the one the Morgan Stanley Cyclical Index (CYC.X) is a bit disturbing.

Morgan Stanley Cyclical Index Daily Chart

Today the Cyclical Index broke a ten-month up trend and dropped below 200-day moving average. Back in May cyclicals broke a longstanding downtrend, and it looked like cyclical stocks were going to lead us out of this bear market. The index faltered after the breakout, but more or less held above trend. If cyclical stocks tend to lead an economic recovery, today's decisive drop isn't encouraging.

Minnesota Mining Daily Chart

3M (MMM) is one of the cyclical stocks contributing to the decline. After dropping below the 200-day moving average, the stock consolidated into a descending triangle. Last week 3M broke below that, and now looks set on testing the April low.

Boeing Daily Chart

Boeing (BA) lost one of its engines in May, and lost the second one yesterday by dropping below support at $49.50. Today Boeing is in a 7.04% tailspin, but trying to find support at the 8/18/00 low at $45.31

Caterpillar Daily Chart

Caterpillar (CAT) is still hanging in there, but is down 3.48% today, even after confirming earnings yesterday. That puts the stock close to testing support at $48.52, and dangerously close to the 200-day moving average.

Jeffrey Canavan
Assistant Analyst
Premier Investor

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