No Entry, No Pain
On the one hand, we got
profit warnings from Computer
Associates International
(
CA |
Quote |
Chart |
News |
PowerRating) and BMC Software
(
BMCS |
Quote |
Chart |
News |
PowerRating), which saw CA open
at 29, down 22 1/8 points or 43%, and on the other hand, a semiconductor analyst
at Salomon Smith Barney took the air out of the semiconductors and at very
extended levels, which unnerved the rest of the tech sector. Both CA and BMCS
had been trading below their 10-, 50- and 200-day EMAs, so they were already
chart ugly. However, the semis have had a dynamic run since bottoming at 821.59
on May 24, down from the March 14 high of 1362.09.
The SOX retraced 85% of the
downmove topping at 1280.84 on June 22. That was a 56% move from 821.59 in just
21 days and suffice to say the SOX was very extended over the 200-day EMA on a
percentage basis. The SOX had closed at 1180.90 July 3, after bouncing off its
50-day EMA. Since 12/31/99, the SOX index was up 67.6% and was a key impact on
many funds’ performance, year to date. The SOX finished the day down
-9.3%.
The leader on the day was the BTK, the
biotech index, which, as of July 3 was up 67.8%, year to date. The BTK ended the
day +5.3%. This index had retraced 76% of its big down move from its top at
806.38 to its low at 379.54. This has been an 85% gain since April 17 and leaves
plenty of air-pocket room underneath. The 3805 Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating) closing
lasted just one day as the NDX headed for the bottom of its five-week trading
range, closing at 3650 yesterday, down 4.1%. The S&P 500 ended down 23.6
points or 1.6%, while the Dow was off just 0.7%.
The banks and brokers did okay, while
the drugs were relatively flat. I guess the only positive note was that the tech
weakness didn’t create a sellers’ panic as total volume was 1.019 billion, the
volume ratio 46, and breadth was neutral to slightly positive. There will be a
rush for analysts to either concur with or challenge the Salomon analyst, but in
the meantime don’t try to catch the falling knife in these stocks and take a
naked position home overnight. We will get some good intraday reflex rallies to
play, as specialists and market makers re-liquefy their positions.
No entry, no pain, so the pre-opening
slam on the semis yesterday only took out the position traders, not the
daytraders. As you know, after a down day in techs like we had yesterday, it is
always good to see how your mutual funds did vs. the S&P 500 and NDX 100,
because you will see very quickly how overweighted in techs they might be. With
the first-Friday-of-the-month game show, and continuing tech earnings focus, we
should get some excellent trading volatility.
| Program |
||
|
Fair
|
Buy
|
Sell
|
| 17.00 |
18.35 |
15.85 |
Pattern Setups
On the semis, be ready if we get some
gap-down openings to fade, trapdoors and opening reversals. The daily chart has
no bearing on your reaction today. Other stocks to look at will be Nortel
(
NT |
Quote |
Chart |
News |
PowerRating), Sycamore
(
SCMR |
Quote |
Chart |
News |
PowerRating), Ariba
(
ARBA |
Quote |
Chart |
News |
PowerRating), Wal-Mart
(
WMT |
Quote |
Chart |
News |
PowerRating),
Lehman
(
LEH |
Quote |
Chart |
News |
PowerRating), American International Group
(
AIG |
Quote |
Chart |
News |
PowerRating), Adobe
(
ADBE |
Quote |
Chart |
News |
PowerRating),
America Online
(
AOL |
Quote |
Chart |
News |
PowerRating), Allergan
(
AGN |
Quote |
Chart |
News |
PowerRating), Siebel
(
SEBL |
Quote |
Chart |
News |
PowerRating), and also
Brocade
(
BRCD |
Quote |
Chart |
News |
PowerRating) and Broadcom
(
BRCM |
Quote |
Chart |
News |
PowerRating).
Have a good trading day.
