coug, thoughts on the market from briefing.com (scary???)
From Tech Stocks on briefing.com
General Commentary
Nasty is the best (cleaniest) word I can think of to describe Thursday's action in the tech sector... Techs were trahsed by investors on the heels of Nokia's (NOK 41 3/64 -14 49/64) earnings warning... Wireless company beat Q2 estimates, but then warned of slower than expected growth in Q3... Stock dropped nearly 27%, taking many of the wireless and communications chip companies along for the ride... Losers included, PMC-Sierra (PMCS 180 3/16 -16 3/8), Broadcom (BRCM 220 1/2 -17 15/16), Applied Micro Circuits (AMCC 146 3/16 -16 11/16), RF Micro Devices (RFMD 71 - 8 1/2), Ericsson (ERICY 18 1/2 -1 7/8) and Qualcomm (QCOM 65 9/16 -3 1/8).
NOK joins MCI/Worldcom (WCOM 39 5/16 -5 7/16), Agilent (A 40 3/4 -2 1/4), Ericsson (ERICY 18 1/2 -1 7/8), Qualcomm (QCOM 65 9/16 -3 1/8) and Lucent (LU 47 1/8 -1 3/8) as high profile tech companies that have guided estimates lower... Not surprisingly, earnings concerns now have many tech investors very nervous, which explained yesterday's flight into defensive sectors such as drugs, utilities and beverages... With earnings growth projected to slow along with economic growth in the quarters to come, investor concerns are quite valid... In fact, Briefing.com has been warning about slowing earnings growth and tough comparisons for weeks... It's one big reason why we think the tech sector/market will remain range bound for months to come.
We pegged the upper end of the range (for the Nasdaq) at 4300-4400... Note that the most recent rally ran out of gas just shy of 4300... The middle of the range is right about where the Nasdaq is now - the 3800 area... And the bottom of the range, as we see it, is in the 3200 range... Could we hit the lower end of the range on the current retreat?
Maybe, but given very oversold short-term technical indicators we're likely to see at least on good rally try first... However, to alter the downward path, the Nasdaq must get back above 4100 and do it fast...Otherwise, rally tries are likely to be met by additional waves of selling with the index heading to the 3300-3200 area over the next several weeks.
This view may seem bleak, but with earnings growth now in question, leadership groups such as wireless, fiber-optics and chips coming unglued, and valuations still relatively high, there just aren't many reasons for buyers to step to the plate.
A lot of investors and analysts will point to favorable seasonsals as reason to jump back in techs... And from time to time such talk may generate some buying interest... But it should be noted this will be the first time in years we head into year-end with the potential for significantly slower growth in both the economy and earnings... Consequently, we may not get the kind of Oct-Dec rally many tech investors have come to expect. |
