Sonny ---at least some targets to shoot for ---from briefing.com:
Gains are always more enjoyable than losses, but we doubt anyone will get overly excited by Monday's modest rebound - especially since it occurred just prior to the FOMC meeting... Basically, gains were driven by short-covering and not by any newfound conviction on the part of market bulls. Traders fully expect the Fed to cut rates by 50 basis points, while leaving the easing bias (if you will) unchanged. However, fear that Greenspan & Co. might wake up and actually cut rates by 75bp, sent shorts running for cover... Barring such a bold step from the overly cautious Fed, bears are likely to reassert themselves at some point today.
This remains a very difficult market to predict, as we have lousy fundamentals on the one hand and deeply oversold technicals on the other. So far the fundamental story continues to win out, as investors find it difficult to muster much enthusiasm for tech stocks amid a firestorm of earnings warnings. The fact that each rally try over the past year has been met by a stronger wave of selling is also weighing heavily on investor confidence.
While the fundamental picture is likely to remain bleak for at least another couple of months, it is important to remember that the market looks forward (usually by about 6-months)... Now let's take a step back and look at the bigger earnings picture... The tech sector posted very strong earnings growth in Q499, Q100, Q200 and Q300... Not surprisingly, the first difficult quarter was Q4 of 2000, as a series of Fed rate hikes and the difficult comparisons led to the a sizable jump in earnings disappointments... The same factors continue to plague the sector in Q101... However, by the end of next quarter the economy should begin to benefit from the change in Fed policy... Meanwhile, we will be staring at less than 6-months of difficult earnings comparisons... In other words, in the not too distant future investors will begin to price in the softer Q4 comparison period and the meaningful (albeit late) rate cuts... We might have to slog our way through a difficult Q1 reporting period before we get there, but the earnings bottom is within sight.
Combine the more promising late FY01 earnings picture with the accommodating Fed and deeply oversold technicals, and Briefing.com sticks by its call that the sector's intermediate- to long-term reward potential currently outweighs the additional near-term risks. Put into numbers, over the next one- to six-months, we see the downside risk as 1780 (-9%) with upside potential to 2530 (+30%)... Our longer-term upside targets are at 2892 (+48%) and 3150 (+61%).
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