Paul, yes, AMAT took me by surprise breaching $52 (and hopefully, everyone that was short covered on that breach on a closing basis). Yet, I have not turned bullish on the sector. We have had a very similar situation in January when both BRCD and BRCM doubled, breaching important resistance just to go to half or less their recent lows. On April 4th, I wrote in the semi thread that a very worthwhile rally (30% to 40% on a full list of stocks) is stronger than I anticipated, however, that could very well still be a fake out. The test of the reality of this rally will be how far the retrenchment gets, for instance, if AMAT does not hold $52, and NVLS does not hold $49, or CYMI, $28 and so on, you know we are very likely to give 70% of the recent run back within a month or six weeks. Hopefully, many loaded up on April 4th and took a good chunk of this rally to the bank.
The problems of overcapacity are not going to be resolved in the next quarter or two, probably only partially resolved (with good visibility of resolution) in the last quarter, and thus, a real low in August (not necessarily a new low in the SOX, but not impossible) is quite probable, IMTO.
Watch how MU, on the other hand refuses going and closing above $50, and even mighty INTC, has its volume already declining from yesterday. AMD after a stellar earning, could do no better than a doji and not much above the after market values of yesterday. I would say that this rally ends on target and no later than next Wednesday, possibly it even ended today. The timing is pretty much what the turnips forecasted, and even the market general ;level for the top of this rally is not far from their forecast, considering the fact that AG's action yesterday was a complete surprise (at least as far as the turnips are concerned), I am not particularly impressed. even the tick did not show much more than relief rally characteristics. I think the houses are using this rally to distribute massive amounts of shares, particularly the INTC and MU. Yesterday, until the FED announcement, INTC traded some 100 MM shares all just under $30, the fed action got us above that number to $32 yesterday, and when INTC started to fade yesterday, the volume increased (the same way this morning).
Even if we have put a bottom in the SOX, I see no reason to chase stocks here, they should come back to what was the overhead resistance before they launch their next move.
Zeev
PS, I should add here that one of the major elements in the original forecast (about three months ago) of April 18th as a top for this bounce was going to come from Japan, ince by that time, Japanese banks will have to start and open their Kimono's a little, and that is going to start a mild (initially) panic in the far east, slowly eating into the US euphoria, the delay in the bottom to gether with the recent surprise fed cut could delay that effect, but not eliminate it. I expect the Asian market to turn south by the beginning of next week, and that might be the signal for our market to come back to its senses... |
