The Day No Chip Upgrade Came
Amazingly, on Friday morning there doesn’t appear
to
be any positive analyst calls on the semiconductor group. In fact, in the
overnight session, Singapore, Japan, China and all of Europe pointed their
fingers across their respective oceans and rolled their eyes and said,
“What’s up with those Yanks?” This phenomena, of course,
can be explained very simply in terms of supply and demand of inventory.
In this case, that inventory happens to be stocks. Remember, folks, the
big institutions don’t buy that stock from you during periods of price declines
because they want to help you out of a jam. Au contraire, they buy it from
you because they intend on selling it back to someone else for more than they
paid for it. And what better way to sell it back to the public than by
generating a fantasamagorical scenario in which we live in a perfect world where
weakness is always a temporary event and that buying semiconductors arbitrarily
— with no regard for fundamentals or valuations — will make all of us rich beyond
our wildest dreams. Thank you, thank you so very much Merrill Lynch for
helping me see the light.
The Philadelphia semiconductor index
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PowerRating) has
risen nearly 22% in the past seven sessions and conveniently was the recipient of
two major plugs (the Merrill “be a numbskull and buy” call and the “INTC
CEO goes to Malaysia to avoid embarrassment in the States” call) the past
two sessions after it had already risen 100 points from its July 25 low.
Please guys, not that again. This is starting to look like a pattern is
developing. How many darn times can the “train leave the
station” without all of you embarrassing yourselves? Can the tech
sector now hold up its own weight without the help of its famous cheerleading
corps? Perish the thought, but it looks like we are about to find out…at
least for a single session. I’m sure Monday morning will hold a new round
of hype and stock pumping from our trusted friends.
The jobs numbers reported Friday morning has been a
non-event. From a technical standpoint, the VIX and VXN are back in
severely overbought territory (short term) and the S&P and NDX cash indexes
are smack up against some formidable resistance areas. The rally from 1166
to 1226 in the S&P 500 cash index has been a doozey, but multiple short-term
indicators are giving us a great Porky Pig “r…r..r..r..that’s all,
folks!” Look for a retracement of at least 50% of the recent
rise to set up some buy setups. As I have stated previously, I think the
short-term picture will support the bullish cause because of the extraordinarily
high Nasdaq short-interest figures. As such, pullbacks should be short and
shallow as there are undoubtedly a lot of trapped shorts who piled in once the
S&P 500 gave us that little cha-cha headfake below the prior week’s lows on
July 24. Currently, the SPX and NDX have been up for nearly seven straight
sessions, so a two- to three-day pullback is certainly in order.
In terms of the ongoing
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PowerRating) saga, briefing.com
shows a detailing of all analyst calls preceding the big drop. Fascinatingly, it details how CSFB put out an
initial “Buy” rating on THQI on May 1 with a $50 price target and
proceeded to reiterated this call on nine (yes, nine) subsequent occasions when
the stock was displaying weakness. This is called “pushing the envelope,” folks. Interestingly, we saw a little boy prosecuted by the
SEC last year for pumping stocks over the Internet message boards. The SEC
said they were going to “make an example” of him. Would someone
tell me how occurrences like these by CSFB are any different from what that
little boy did? No, actually, tell me how it’s not 10 times worse than
what that little boy did.
As a recap, many of you were aware of our THQI
position and one brave soul decided to publicly (however “public” the
TM message boards are — ha ha) denounce my short position in THQI when it was
trading $60. This person outright took a long position in the stock not
because of the chart, not because of fundamentals, but simply because he was
brazen enough to want to prove me wrong and fade my call…Well, it hit
$44 yesterday, I hope everything worked out.
Peace,
Goran