General Commentary
If you were looking for one sure way to cure investors of their prior obsession with the technology sector
this is it... The relentless day to day declines has many former tech traders turning their backs on the group
altogether... Increasingly, the message we get from clients and traders is that they are tired of the head
fakes, false promises and, most of all, the losses.
Though we haven't seen the one big bloodbath that many pundits suggest is necessary in order for the
sector to put in a major bottom, Briefing.com contends that death by a thousand cuts is actually much
worse... This is the type of action which results in ever decreasing buying interest.
It is also the type of action which is very difficult to predict... The majority of short-term technical
indicators have been oversold for weeks now... Yet, the market keeps going lower... When we do get a
gain, like the one we saw on Friday, it is quickly met by renewed selling interest, which further discourages
bulls, making it harder for the market to sustain an advance the next time around.
Given the thin trading conditions, the upcoming holiday, bearish market sentiment and ongoing anxiety over the state of the economy, it is quite possible that the market/sector will simply remain oversold a few days longer... Regardless, we suggest tuning out the short-term noise and focusing on the intermediate- to
long-term picture.
Despite the negativity which dominates the media at the moment, it's important to remember the following:
inventories are being reduced; companies are becoming much leaner; rates continue to come down; new
supply into the sector has dried up completely; leadership names are at or near very attractive long-term
entry levels; the Nasdaq is testing its 100-month moving average; and earnings comparisons will get much
easier beginning Q4... While these factors may not trigger buying today or tomorrow, they a) provide a
floor under the market and b) are the building blocks for the next major advance.
Robert Walberg |
