Computer Associates Makes a Boo-Boo
In light of the market’s
newfound I-don’t-want-to-work,
I-just-want-to-bang on-me-drum-all-day disposition, I have come up with some potential news
stories for tomorrow’s market that can really give us the “breakout”
that everyone believes to be a sure thing:
Imaginary Newswire
San Jose, Calif., 4:10 p.m. EST. John Chambers, CEO of Cisco Systems (OTC:
CSCO) announced after the close of trading that the bean burrito with extra guacamole he had for lunch has given him crippling gas. In
consideration of the risk of inflicting serious bodily harm to his colleagues with his vile flatulence, Mr. Chambers has suspended today’s earnings release
and conference call. (Hell, Micron Technology did it and got away with it for over a week, why should this be
different.) Mr. Chambers was quoted as
saying: “Look, I don’t feel like pressing the “mute” button on my
phone every time. I feel a real humdinger getting ready for lift-off!” In after-hours
trading, Wall Street applauded the news as the June Nasdaq 100 futures were locked
limit up in Globex trading. CSCO and networking counterpart JNPR were
trading over 17% higher on the news.
Imaginary Newswire
Washington, D.C., 1:23 p.m. EST: The White House has re-released a statement in which the President warns Wall Street once again that the
first-quarter GDP numbers released last week may be subject to change. In a statement taken in the White House Rose Garden, Mr. Bush exclaimed: “Look, I ain’t jokin’ this
time. That 2% GDP number has about as much of a chance of
holding up as that Rich pardon. I warned ’em all, so I hope Americans don’t come
lookin’ back at this rancher after their steers have already left the corral.”
Democrats Gephardt and Byrd were quick to respond to the President’s statement by stating:
“This is just another example of the Republicans trying to take food off the table
of the needy and giving it to the wealthiest 1% in this country.” No elaboration was provided as to the relevance of their statement to the
President’s comments. In midday trading, the markets rallied on the news with the S&P 500 trading up nearly 2% on the session and technology-related
issues soaring as well. Fueling the rally on Wall Street, Tom Galvin and Ralph Acampora were quick to add that they believed the GDP number will be
revised higher to “somewhere around the 5% area we had back in early
2000….yeah, that’s the ticket."
Imaginary Newswire
Islandia, NY, 2:45 p.m. EST: Shares of Computer Associates (NYSE:
CA) were down over 8% today as company officials claimed that a “typographical
error” resulted in the firm announcing its quarterly EPS at 40 cents rather than the
actual 16 cents it did earn. Umm…WAIT A
MINUTE!! THIS IS ACTUALLY A TRUE STORY!!
Is this what it has come down to? Is this how pathetic this "great
game"
has become? Has this game just become a “let’s ‘unintentionally’ create a
news event that creates excitement and leave the burden of proof to the masses”
deal? What is the market telling us, and how should we interpret it?
First, today’s volume was the lightest of the year. This means that rather than having the sellers come out of the woodwork and sell the market down in
an attempt to thwart the current rally, it appears the bulls have pretty much
run out of dry powder. Let’s face it, we have all been told not to fight
the Fed and the stay out of the way of this freight-train “new bull.”
In fact, an examination of current positions in the Rydex OTC funds reveal that for every
one share of Nasdaq stock sold short, there are 20 shares long. That makes the ratio of longs to shorts at 20:1. In my estimation, many of the short
positions in technology stocks have been blown out of the water over the past
30 days. The shorts aren’t in charge at the moment, the longs are and they are coming close to running out of rocket fuel in the short term. Once the
hedgies sense that the market is getting a wee bit heavy to continue pushing
up with ease, they will turn and burn faster than you can say “palms
out.” From a mass sentiment standpoint, I even sat in front of my battle station
today expecting a scorching last-hour rally and didn’t want to step in the
way.
Second, the job-cut tallies from April have been calculated and reveal that U.S. companies cut a total of 165,564 jobs compared with 162,867 in March.
These unfortunate individuals will probably not have the financial wherewithal to purchase
SUVs and Microsoft X-Boxes in the coming months.
As gasoline is over $2.30 a gallon here in Chicago, cigarette prices soar to near $5 a pack, and airline tickets and hotel rooms begin to add special
“energy” and “fuel” related charges to their bills, I’m
beginning to wonder where price inflation would have to occur in order to generate some
attention. Nonetheless, we are being told at some time in the future,
after sufficient rate cuts, Greenspan will finally be able to pull the economic rabbit out of the hat. Or better yet, we could be in a modern-day Groucho
Marx “You Bet Your Life” episode where at some point the magic rate cut
will be decreed by Augustus Greenspanus and the duck will fall down out of the sky
and we’ll all win. In the meantime, we wait and we endure. I read an old
quote somewhere this weekend, and no truer words have ever been spoken. It said: “The graveyard of Wall Street is filled with
the bones of men who were right too early.” Words to be
remembered for the rest of your life. You can go broke trading your convictions. So you gotta
"know when to hold ’em and know when to fold ’em." At the present time, let’s look to where the
trades set up.
As you can see, there are a lot of similarities between these two charts and many others in technology that follow the action of the Nasdaq 100 futures
closely. These charts are setting up some good shorting opportunities
should
the market roll over for multiple days.
The Nasdaq 100 chart shows that it has not
confirmed the highs that have been made in the Dow Jones Industrials over the past week. This
non-confirmation and resultant weakness is a warning sign that this current period of stock
appreciation may undergo a short-term correction before another leg-up can resume with any firepower.
Have a great night.
Goran