WAS LAST WEEK A SET UP? I have not written in about a month since I was on EXTENDED vacation, but I would like to comment on several market points that I have noticed the last 2 weeks.
Look closely at the rally in January on a percentage basis, look at when the rally occurred..........during earnings release,.........also look at what happened at the top of the rally ...or the bottom when everyone and their mother said we were going to 3600-4200.
We know since Csco's earnings the first week of Feb that most stocks got cut in 1/2! Those that bought during the January rally........(which consisted of 9 up days and 3 down days)
2 weeks ago a rumour on the street emerged that Joseph would change his opinion on the sox stocks, then he came out on a friday and absolutely denied he was changing his mind.
Then POOOOOOOOOOOOOF in the midst of a 2-3 day rally when most shorts came in on the 2nd day of the rally and took positions JOSEPH UP GRADES THE SEMIS!! WHAT?? Did he not just deny that 2 days ago?? Was he taken away by martians and given a new brain??
What actually happened was the oldest trick in the book. Fund managers took heavy bets the last 2 weeks as nasd hit 1600 area, they knew after every 2nd day of rally the shorts came in....so they set the shorts up. Any doubts look closely at the volume of the stocks that surged from tues-thursday. I believe as the retail shorter was getting squeezed the funds backed their long positon...or painting the ask!!
Lets now look at a % basis how high several stocks went during this 4 day rally: QLGC 19-32 TXN 26-36 AMCC 11.5- 22 RIMM 17-29 JDSU 13-22 TQNT 11.5-19
Its my belief they will most likely open the stocks flat to up to bring more poor souls in to buy long monday but watch what happens as the day and week go on.
In conclusion I believe NASD cannot now support the currnt valuations of its stocks, with earnings compression continuing. This is far worse then I could of ever imagined 2 months ago, and I do believe we may see 800-1100 over the next 12 weeks as reports of worse then expected earnings come down the pipe. I now see that the consumer is catching this recession fever as evident in the retail numbers. I believe it may take a year from June until things in the NASD and our economy change.
The fed is very afraid of stagflation but they have no choice but to lower rates by another .50-1.0 as they see signs inflation is coming back. Also the strong dollar is not helping the situation. Watch as EUROPE gets the recession fever from may-nov.
Good luck everyone I will be adding heavily to my shorts on monday and I love shorting the CHIP STOCKS! This sox has another leg down that will be 50% lower then the last down draft. Just take a chart of a stock like AMCC or TXN and look where the stock was trading in 94-95 that is where it should be valued now, at a conservative view.
Remember we have not seen any indications at all that we are even close to a bottom in this cycle. I expect some very very bad reports this week, and worse the first 2 weeks in may. Did anyone listen to TQNT's, JNPR's or LMRX CC's?? These companies are at like 1/8th of capacity they were in just 6-9 months ago. I agree 100% with Niles who said very wisely that after capcity goes so goes pricing. This pricing ax will take some chip stocks to levels noone will ever imagine. look at where the Disk drive makers went; KMAG, WDC, RDRT, MXTR. I believe on a percentage basis chips are going as low if not lower over the next 1-2 years.
I lived through the chip cycle in 87, 90, and 95 and we are at a far worse juncture due to y2k and simply OVER PRODUCTION!! ( Perhaps thats why most insiders dumped over 60% of their vested stock from 1/00-12/00. Did they know?? I think they did!! |
