FOR THE SHORT TERM TRADER
WILL MONDAY be another day of dramatic declines? After the closing bell on today's 132-point drop in the Dow -- and 20-point fall for the Nasdaq -- Bill Chenoweth of Turner Small-Cap Equity fund is feeling a bit queasy.
Though Chenoweth's small-company holdings have done somewhat better than the overall market in the last two ugly days of trading, he believes Monday could prove to be another day of pain. The market's major focus will be semiconductor companies like Applied Materials (AMAT) and related techies like Intel (INTC). Applied Materials fell 3 47/64 to close at 33 17/64 a share today, based on concerns about dwindling demand for the company's equipment, Chenoweth says. And bellwether Intel fell 1 7/8 a share to 80, following an announcement that the company will postpone the opening of a new manufacturing plant. Another high-tech nightmare came courtesy of Merrill Lynch analyst Tom Kurlak, whose bearish semiconductor report issued Wednesday may have tarred the tech market across the board. One likely casualty, says Chenoweth: Texas Instruments (TXN), which declined 9 a share to 111 7/8 on Friday. "The concern," the fund manager says, "is whether this could turn into what happened in 1995 -- Could it be a protracted downturn for semiconductor stocks?" Analysts aren't expecting that, he notes, but a lot of people are scared. "It's caused a kind of exodus," he explains. "It seems right now there's a little bit of a piling-out effect."
That effect could gain steam, Chenoweth argues, if these stocks start to break out of their technical trading ranges. "A lot of people look at 200 day moving averages and many of these stocks are sitting right on top," he points out. It looks like these stocks may be about to dip below their term lows and that's when "investors sell without asking questions."
Is no news good news? Monday may be the test. While there won't be much economic news to report on the weekend wake-up day, Tuesday's employment cost index announcement could be a market turning point. Those figures should be watched closely by Alan Greenspan among others, and Chenoweth argues that favorably low numbers may be enough to keep the Fed chairman from holding off an interest rate hike at the Fed's November meeting. "A week or so ago I was getting worried there was a better chance he might raise rates," says Chenoweth, "but the Asian crisis has probably put that on the back burner. It slows their demand for our products and that slows growth. We'll probably see some slowing now."
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