Yesterday's prudentbear. (I forgot to post yesterday) -->
Dip Buyers Show Up As Usual
Asia was lower last night as Japan fell a percent, and Hong Kong was off a hair. Europe was up under a percent as we rolled around to the US open where the futures were higher in the pre-market. We opened flat, dipped a bit and then launched higher, but sellers smacked it before it could really get going, and we turned back to the downside and took out the lows. That was the low for the day as we spent the rest of the day flopping around near that low. The last hour saw the usual dip buyers show up and drive us higher to end near the highs of the day. Volume was once again just OK (1.1 bil on the NYSE and 1.8 bil on the NASDAQ.) Breadth was positive by a nose on the NYSE and slightly positive on the NASDAQ. Big winners were in the biotechs as the BTK gained 4 percent. Big losers were in the golds as the HUI fell 6 percent.
Merger partners TQNT and SAWS warned last night for Q2. TQNT said earnings would be about 30% of what people expected and revenue would be down about 11 percent. TQNT’s CEO also had something interesting to say about the 2nd half rebound: “I can not tell you whether or not we are in the bottom of the slowdown and I cautiously advise you to use this forecast for the third quarter and fourth quarter.” TQNT and SAWS were both smacked for 17 percent and closed just off the low. This is noteworthy simply because of the fact that people appear to actually be responding to the bad news with selling. A week or two ago this would have been ignored and maybe even bought because after all if the 2nd half is going to see a recovery you better buy them now while you still can, right? The rest of semi-land was smacked as well as the SOX traded down about 3 percent early in the morning. However, late in the day INTC repeated their $7.5 bil cap ex number again, and that gave a bid to the equipment stocks which turned the whole semi tape, so that by the close the SOX was only down a hair. While I say “the equips caught a bid,” it wasn’t as big of one as we might have seen a week ago and many equips never could even get out of the red. So, that might be a bit of a chink in the armor there. All that matters right now is psychology and price action in these stocks. You have the bulls who believe that the Fed’s rate cuts will give us a 2nd half rebound who are buying with both hands, and then you have the guys that don’t think there will be a rebound who are selling. One is right and one is wrong, and prices will eventually reflect that. We’ll find out who is right before the summer is over I suspect, if not much sooner. The rest of tech started the day weaker but likewise caught a bid late in the day. There wasn’t any real pattern to who was up or down that I could make out. It is worth noting that even those shares that were up failed to take out yesterday’s high, except for MSFT, which managed to take out its high yesterday by a few pennies. If the bulls can break out MSFT on the charts tomorrow, they may get another tech run going I suspect. If not, things may turn nasty to the downside if this rally fails here. We’ll just have to watch and see. As I said, all that matters right now is price action and sentiment. That’s the sad truth of the matter. Financials were mixed on the day. The BKX rose a touch, and the XBD rose a percent. The big boy rose a hair. FNM and FRE both had enormous intraday reversals to close down. While most of the buyers were probably focusing on the current euphoria over the Senate flip today that likely kills any legislation to reign in these two guys, I guess the sellers noticed that the housing boom is slowing fast and mortgage yields are still rising? We saw this morning that April new home sales fell 9.5 percent, the biggest drop in 4 years.
Oil fell $1.17, and gasoline traded to a new high before reversing to close down (a bearish reversal.) The XOI fell a touch, and the OSX fell 2 percent. Gold rallied early this morning off the greater than expected jobless claims number as I guess people assumed this meant more rate cuts are coming, but the rally didn’t stick. By early morning, gold had given up its gains and collapsed to retrace almost all of last Friday’s rally. Gold did, however, recover a bit into the close to end down $4.60 at $279.40. Lease rates moved up a bit again to a new high for the month. The HUI slumped 6 percent and closed right on the low. The US dollar index rose a hair. The yen took a breather from yesterday’s 5% launch, and the zero bounced an eyelash. Treasuries were smacked all across the curve as the yield on the 10yr rose to 5.48%. The catalyst for this was supposedly Fed Governor Meyer’s comments about the Fed needing to “avoid overshooting” with interest rate cuts. I think the backup in yields in the bond market since the rate cuts started, petroleum prices going crazy, and gold’s breakout last week are all saying that he’s a little late in getting concerned about overshooting. In fact, I’d say there’s a very good chance that the bond market breaks badly to the downside in the very near term from a technical perspective.
Today’s selling in reaction to TQNT’s and SAWS’s bad news is a sign that maybe people are starting to rethink the 2nd half rebound, but we’ll need more evidence than that to say that the herd has completely given up on that daydream. Today’s late-day rally says they’re probably not quite ready to face reality just yet. Speaking of psychology, AAII said today that bulls had moved up again to 62% bulls, and that bears had fallen again to 17%. Tonight, Uncle Al is giving a speech, and it’s anybody’s guess as to what might come out of his mouth. We also get the revision of the Q1 GDP number tomorrow morning. Like I said yesterday, traditionally we rally into the holiday weekend, but maybe we’ll get a surprise and turn down? It may be a simple matter of whether more bulls or bears come in for work tomorrow… |
