The Sun Also Sets
For a sector that has allegedly
seen the bottom, technology stocks certainly have not refrained from launching
stink bomb after collective stink bomb. Today,
(EMC)
and (SUNW)
were the biggest names bucking the “let‘s
make a dealâ€-esque weekly bottom–calling
circus. SUNW not only missed its
current quarter in every way measurable, but also ratcheted down next quarter‘s
EPS and revenues as well. Management
refused to address long-term growth implications (do you think this is becoming
a pattern?).Â
Once
again, the people who run technology firms are not even attempting to forecast
the future, yet we confidently rely on numerous analysts to show us what the
future has in store. Some are suggesting
that SUNW may not make a “U†shaped recovery (as the “V†shaped argument
has pretty much been shown for the charade that it was, the “U“
shaped hypothesis gives the bulls a bit more time to suck more sideline cash
in), and may instead form an “L†shaped recovery.
You mean, move sideways without a spike back to old highs?
Blasphemy. No immediate snapback
to market caps of March 2000 without a wait? Perish
the thought. This market will never
eliminate the current excesses and speculative environment until it stops
reacting to ill founded and irresponsible analyst calls and projections. Until
then, the bear will continue to growl.
Now that the 2.0 GDP number
from last month was shown to be a farce, will the people who publicly stated,
“this GDP number (2.0) is proof that any chance of a recession has
been eliminated†recant their untimely (and perhaps, irresponsible) statement?Â
Probably not. Heck, if you keep
calling a bottom every week,
you will ultimately be right at some point.
Forget about fundamentals, we‘ve
got ourselves a good old-fashioned liquidity-driven rally that continues to be
fueled by Uncle Al and his clueless FOMC warriors.
Nevertheless, personal savings came in this morning with its tenth
consecutive
month of decline, ringing in at a dismal —0.7%.Â
CNBC was quick to tell us, “Economists
don’t put too much emphasis on this number because it has a tendency to be
flawed.â€Â Fantastic.
This is a bearish number but should be disregarded because it is
allegedly flawed (for 10 straight months, mind you), but the GDP number, which
was revised lower by nearly 40%, and the retail sales numbers that continually
get revised lower are just fine. Folks,
this is just another reason why the stock market bus continues to steam downhill
out of control and without brakes. We
haven’t even begun to see the pain that this secular bear market will unleash.
Apparently, the market has
encountered somewhat of a “long squeeze†the past week as buyers who were
coerced into buying stocks during last Monday’s bullish frenzy have been stuck
holding the bag. Nonetheless, the same
people on television who comforted those buyers last week because the market was
declining on low volume were nowhere to be found today. As such, the potential
of this current pullback is extremely difficult to gauge, as the chart
formations and technical indicators are flashing very confusing and mixed
signals. On one hand, the short-term
indicators are showing somewhat oversold readings, while the intermediate–term
signals are still heavily in overbought territory.
As a result, we may be in for a period of corrective rallies followed by
renewed movement either sideways or lower. With
the amazing level of bullishness we have observed
over
the past month, it would be difficult to imagine the market just rolling over
here without another major leg higher, perhaps to new recovery highs.
This is what the charts tell
us:Â
 
With negative earnings warnings/reports after the bell today, the market appears
poised to open lower tomorrow. However,
the S&P
cash is clearly in an area of support, and a corrective rally may materialize at
any time. Keep it close to the vest and
pick your fights carefully.
By the way, I just finished
reading Dave
Landry’s book, and I think it is absolutely great.
I strongly recommend it, as the principles and patterns Dave illustrates
will make you money in any market environment for years to come.
Excellent job, Dave.
Have a great night.
Goran