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| 7/30/99
Merrill Lynch (MER)
Points to watch: Keep an eye on the shares of MER and the brokerage
stocks in the coming days. The divergence between the performance of
the brokerage stocks and the major averages over the past 3 1/2 months
continues to sound an alarm bell.
MER peaked in mid April, and then
entered a sharp decline, bottoming on June 14th at 66.63, a level which
also acted as support for the stock during declines in January and
February. The stock then mounted a weak rally from
June 14th to July 6th which stopped at the 38% retracement of its
April-June decline. Generally, if a stock attempts a rally after a
decline and the rally only retraces 38% of the prior decline, the stock is
likely to resume its decline and take out the old lows. A move below
support at 66.63 would be a strong sell signal for MER and the entire
brokerage sector. Overhead resistance is at 75.3-75.9 (where the
21,55, and 200 day moving averages are closely bunched up), and at the 7/6
high of 81.43.
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