Upon review of indexes and sectors, it becomes clear that support lines have been breached across the board. This negates a long-term view I'd espoused of hitting a peak in mid/late June, with a summer-long decline ending in October.
More likely, short term, and longterm (using historical data in combination with current conditions):
Today: perhaps a 25 pt rally; perhaps a rally longer than 1 day, but not past 2200. Most likely is a one day rally, because, near-term, I expect more bad news.
Key reading: read SUNW's warning, recognizing that CLS gets 24% of its revenue from Sun, QLGC 13%, LSI 12%, BHE 10%, and that those who get a high exposure to the Sun Solaris platform, VRTS (45% of Q1 license revenue) and JNIC (72% of revenue).... ouch. This info came from briefing.com
Key reading #2: MSDW's downgrade of capex projections in FO stocks sounds like a death knell for these: (current price/new projected price)
NT (13.35/10)
TLAB (33.93/27)
JDSU (16.94/12-13)
SCMR (8.99/6)
CIBC lowered projections for JNPR a tad too.
Near-term: in addition to those lousy apples and a lotta second-guessing about B2B, it seems the SOX has woes, and where it leads, tech follows. MSDW's outlook in this sector cut TXN and RMBS, but slashed at CY, BRCM and NSM. AMCC dropped in sympathy to BRCM.
Key readings: Mid-qtr updates are due from ALTR (today) and XLNX (Monday) and these two are in a sector whose prices rose 20% higher than the mkt in May. Others in the sector include LSCC and CY... right after the MSDW report indicating CY revenues would be 60% of the previous projection.
Near-term, it looks like CY is a good short till it drops below 18, with 17-17.5 as a probable bottom. And few semis will have much upside nearterm (mebbe TMTA, RMBS... RMBS came 5 cents from its AT low today).
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Overall, my guess that we could exceed 2400 in June is gone. Now it seems we'll trade sideways a bit, between 2000 and 2200, till about June 12/13, after which, I expect a brief drop to 1850-1900, a return to 2100 at a final peak just prior to FOMC.
The 2 weeks after FOMC will have us testing the 1613 bottom again. Earnings will restore us to a peak during an incline from approx 7/15 to 8/15, but this peak is not likely to exceed 1900. A slow downtrend will follow, taking us to a final low somewhere around 1200-1300, in early October.
As far as concerns about inflation, most is priced in. Gas hit its Memorial Day peak and should fall from here; gold and bonds seem to support that view... any inflation has been priced into the equity markets already.
Expect the market to yoyo daily, making swing trading difficult again, except for key runs in key places, as noted.
The best indicators we have are LAST (current) qtr earnings now. Those who lowered expectations for Q2 will be dropping accordingly, especially in about 10 days. |
