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Major indices lower, with bid in Gold and Healthcare

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The major market averages are just off their lows with the Dow Industrials (INDU) 8,447 -1.5%, S&P 500 Index (SPX.X) 895 -1.49%, S&P 100 Index (OEX.X) 448 -1.58%, NASDAQ Composite (COMPX) 1,291 -1.82% and more volatile NASDAQ-100 Index (NDX.X) 925 -2.17% seeing declines.

Yesterday, about mid-session, the Gold/Silver Index (XAU.X) 73.93 +1.34% reversed from a sharper morning gap lower to finish with a gain and has built some upside this morning, most likely a defensive move as many market participants further anticipate some type of U.S. lead attack against Iraq.

With many of the sector indexes showing similar 1 to 3% declines, healthcare groups like the HMO Index (HMO.X) 560 +0.04% and Morgan Stanley Health Care Index (RXH.X) 319 (unchanged) are exhibiting relative strength versus the broader market averages. While still just below their point and figure chart's bearish resistance trends (short in length) HMO's such as UnitedHealth Group (NYSE:UNH) $89.90 +1.37%, Oxford Health (NYSE:OHP) $41.86 -0.07% and Tenet Healthcare (NYSE:THC) $50.12 +0.98% look to attempt breaks from consolidation from their bar charts.

President Bush has completed his speech to the United Nations designed to build international support for measures to oust Iraq's President Saddam Hussein, telling the United Nations General Assembly that it must be prepared to address the "grave and gather danger" posed by Iraq's efforts to develop weapons of mass destruction. So far, only British Prime Minister Tony Blair has offered enthusiastic support for a move against Iraq. The United States said it will back up its call for action with a document accusing Saddam of violating 16 U.N. resolutions over the past decade.

In all, there was "nothing new" in President Bush's comments, but comments look to have market participants dealing with a potential U.S.-lead attack on Iraq becoming more likely with each passing day.

Volume at both the NYSE and NASDAQ is running at just over 400 million shares, which is slightly ahead of recent volume. Breadth at both the NYSE and NASDAQ is decidedly negative with decliners outnumbering advancers by a 3 to 1 margin respectively.

New highs versus new lows is somewhat negative at the NYSE with 37 stocks hitting new lows versus 25 stocks achieving new highs, while this indicator is very weak at the NASDAQ with 65 stocks hitting new lows versus just 9 stocks at new highs. Notable lows have Sun Microsystems (NASDAQ:SUNW) $3.24 -2.87% and NYSE listed and Dow component McDonald's (MCD) $20.25 -5% at new 52-week lows.

Yesterday we noted a 52-week low in SUNW and thought Dow component Hewlett Packard (NYSE:HPQ) $13.87 -3.4% a good looking short/put candidate. Key technicals near-term in HPQ for a bear is a close below the trying to round higher 50-day SMA at $13.85.

Jeff Bailey
Senior Market Technician
Option Investor

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