INTC Whiffs For The Third Straight Quarter
(Due to my
obligation to film a live show on WebFn every Thursday after the
close
of trading, my commentary will be delayed until the following morning. To accommodate
additional taping after Friday’s close, I will post my Friday commentary
Saturday morning.)
Intel
(
INTC |
Quote |
Chart |
News |
PowerRating) stepped up to the plate again
for the third quarter in a row and whiffed again
with its earnings warning issued for Q1 after the close of trading
yesterday.
In issuing
statements that detailed the company’s woes as a result
of “unexpected weakness” spreading to other sectors such as
communications, servers,
networking and to other geographies (Asia and Europe),
the Street was most certainly caught off guard. To date, most of Intel’s
problems had been assumed to have been caused by continuing weakness
in the PC sector.
However,
INTC made a point of explaining that the PC sector
has not deteriorated further and that there would not have even been a
warning if it was only due
to PC weakness. Rather, they explained that due to the
consequences of “pervasive” economic weakness, it sees “weakness
in nearly
all Intel products.” Ouch, that’s going to leave a mark. Not good
news at all for the
“buy now for the second half recovery” cheerleaders on Wall
Street. Let’s wait though,
they’ll probably find a positive way to spin this and
continue to lull everyone into a false sense of security by pumping up
the volume on the
“bad news is good news” song they have been brainwashing
the average investor with
for several months now. Heck, they still have work to
do in sucking in all the sideline cash they have their hearts set on.
Barton Biggs said something very
important yesterday morning that went largely
unheeded. Rather, CNBC focused primarily once again on the unrelenting
bullishness of Joe Battapaglia and the hoards of retail analysts interviewed
throughout the day urging us to buy retail and department store stocks.
Back to Barton, he said that the consumer cyclical side of the broader
market has completely discounted a “V”-shaped economic recovery and
has not remotely
considered the possibility of a “U” or “L” type of recovery.
Isn’t it funny that
everyone on television and all the market gurus are telling
us what kind of recovery we are going to have when they never told us
that we were heading into
this economic downturn in the first place? Isn’t it
amazing that they can still show their faces on television and tell us to
buy now when they never
told us to sell at the highs?
Nevertheless, Barton Biggs, for whom I
have a tremendous amount of respect, confirmed
my suspicions about the broader market’s current valuation. That is,
the market is fairly priced for a nano-second each year…it is either
priced for perfection or
priced for the worst. It is very clear that the Dow and
S&P 500 indexes are priced for perfection at the given time due to the
fact that a “V”-type of recovery is discounted in its current valuation. Last
night’s confession by Intel Corporation and the statements they made
concerning the magnitude
of the slowdown should probably be the beginning of the
end for the “V”-bottom economic recovery.
BUY NOW because of a “favorable
economic environment”?
Yet our senses continue to be barraged
each and every day through every media source that we should be loading the boat
on retailing and apparel stocks. In
my career I cannot remember such remarkable hoopla being generated to
drive these otherwise
boring sectors. As many of you know, I have targeted these sectors as being the
momentum sectors du jour which are being hyped by Wall
Street at the current time (near the end of a multi-month rally in which many
of these stocks have appreciated by 100-500%) so the bid dogs can liquidate
their inventory and perhaps spin off some short positions. It is amazing
how the Wall Street “fast money” crowd operates as they will sell
100,000 shares of stock which they have been long for months, turn around
and short 100,000 shares
of the same stock on the same day. Are the big dogs
through with these retailers yet? It appears their end is getting near.
Only the big bail out by Abby Cohen
on Wednesday morning and the multitudes of
retailing upgrades, etc. in the past two days were able to give many of
the retailing charts the
old “cattle prod” from following through on their rollover.
Nevertheless, one must remain steadfast in his/her analysis, as it
sometimes takes several
weeks for a trade of this nature to come to fruition.
We have already determined through our
analysis that the uptrend of the S&P retailing
index has ended and a new trend has formed. We are merely experiencing
a rally back up to the “ice” where it fell through.
A great man once said “He who
follows the crowd will never be followed by a crowd.”
Always remember this statement when
your trading is starting to be influenced by
the mass psychology.
Technicals mean nothing this morning
as this market is completely and utterly news
driven at this time. Step back and let the dust settle before drawing
any conclusions.
Goran