From Briefing.com: General Commentary - So much for October being one of the worst months for the market, as the Nasdaq, DJIA and S&P 500 rallied by 13.5%, +10.6% and 8.6%. Gains were the biggest for any one month in roughly 15 years.
Nevertheless, the rally remains suspect in our eyes given the lack of fundamental change. Earnings growth remains sluggish, especially in technology. With company after company stating that they see little to no change in IT spending over the next six months, the long-awaited earnings rebound remains more fantasy than fact. Considering that the street had been building in a sizeable bounce in earnings during the first half of next year, we're also likely to see numerous estimate reductions in the weeks and months to come.
Quite frankly the current rebound, while impressive in its scope and its duration (at least relative to the many false starts over the past three years), is being driven more by short-covering, oversold technicals and end-of-year portfolio jockeying than by a demand reversal. Until demand actually begins to accelerate, it will be very difficult for a market already trading at questionable valuation levels, to sustain an advance much beyond current prices.
There's no question the sector/market has been resilient in the face of bad news - especially economic news. Ability to rally into negative news is always a good sign. However, until the indices take out significant technical barriers (for sufficient time or by a sufficient margin), Briefing.com sees no need to get overly excited by the advance.
Will be interesting to see how stocks react to today's jobs data. If the employment report comes in well below expectations (as a few economic releases have in recent days), we could easily see the indices take a dive off the open... Given the fragile nature of rally and market psychology, a decisive break of the 50-day moving average would almost certainly spell a material reversal.
Without improvement on the earnings/economic fronts, Briefing.com maintains that the sector/market will remain volatile and dangerous.
Robert Walberg
After Hours; Though its market-cap of $228 mln clearly reflects a small-cap company, ChipPAC, Inc. (CHPC 2.06 -0.59) is suffering a big percentage loss in extended action. The semiconductor packaging, test, and distribution services company reported a Q3 loss of $0.03 per share that was a penny wider than the Multex consensus estimate and said it expects Q4 revenue to be in the range of $89-92 mln with EPS in the range of ($0.07)-($0.10) per share. The current Multex consensus estimates are for a profit of $0.02 per share and revenues of $105.4 mln, respectively.
4:16PM O2Micro misses by a penny (OIIM) 8.58 +0.24: Reports Q3 (Sep) earnings of $0.07 per share, $0.01 worse than the Multex consensus of $0.08; revenues rose 52.0% year/year to $18.0 mln vs the $18 mln consensus.
4:14PM ChipPAC misses estimates; guides lower (CHPC) 2.63 +0.18: Reports Q3 (Sep) loss of $0.03 per share, $0.01 worse than the Multex consensus of ($0.02); revenues rose 26.8% year/year to $94.7 mln vs the $100.5 mln consensus; expects revenue for the fourth quarter to be in the range of $89 million to $92 million with EPS in the range of ($0.07) to ($0.10) per share -- Multex consensus estimates are for earnings of $0.02 per share and $105.4 million respectively.
4:10PM Keithley beats by $0.04; guides below consensus (KEI) 8.80 -0.70: Reports Q4 net of $0.05 a share, $0.04 better than the Mutlex consensus, vs yr-ago EPS of $0.08. Sales rose 10% to $28.4 mln (consensus $27.33 mln). For Q1, co sees sales of $24-$27 mln and expects red ink ranging from the low teens to a "slight pretax loss." Multex consensus for the qtr is $27.7 mln for sales and a profit of $0.05.
2:55PM Vishay (VSH) 10.50 -0.10: Trading at pre-earnings announcement levels, shares are about 2% off their lowest intra-day levels, but still 0.9% down for the day. Yesterday morning, company reported Q302 earnings of $0.09, $0.04 worse than Multex consensus. Despite earnings miss and lowered Q4 estimates, Thomas Weisel maintains Buy rating due to shares' downside being limited by tangible book value of $8.50 per share, expectation of shares recovering quicker than competitors, lower costs going forward due to Chinese exposure, and potential for further opportunistic acquisitions. Needham agrees that stock's downside potential is limited; thinks current valuation carries meaningful upside and adequately reflects risks of weaker than expected recovery in electronics; reiterates Buy rating and price target of $16.
2:39PM United Micro (UMC) 4.32 +0.07: Based on tepid analyst commentary, shares are up 1.6% in today's session despite last night's Q302 earnings miss of $0.01, $0.01 worse than Multex consensus. Bear Stearns reiterates Outperform rating due to compelling valuation, intact fundamentals, and forecast of sequential revenue growth. Soundview Technology, likewise, maintains Outperform rating; sees flat to modest growth from communication in Q4 with continued weakness out of computer and potential for further softening from consumer as holiday builds come to a close; reduces estimates for Q402 and Y03. Although moving in sync with SOXX index, shares are relatively outperforming in today's session.
2:17PM Cisco Systems (CSCO) 11.28 +0.37: Although expecting in-line results for company's Q103, Soundview Technology believes that despite brand name, product breadth and broad channel reach, skepticism relative to macro backdrop, continued weakness in end market conditions and solid top-line trends will limit near-term upside and keep shares range-bound into 1H03; despite cautious view near-term, believes strong fundamentals will enable company to maintain its position as industry's dominant networking vendor; expects management to offer flat top- and bottom-line guidance for Q203. Although 3.4% up in today's session, shares are still 4.2% down from recent high of $11.78 per share.
2:17PM Nasdaq Composite Intraday : -- Technical -- The index has been confined within a choppy trading range for the last several hours slightly above unchanged. From an intraday perspective, watching supports at 1331 and 1328. A sustained penetration of these levels leaves the door open for a move back to and through the morning low. Initial support thereafter is in the 1315 area followed by a stronger floor near 1300. Resistance is at the early high of 1347 which also marks the Sep high.
1:59PM Chart Watch -- Divergences : This is not an attempt to scare you but... Beware the technical divergence. What is a divergence you ask? Under typical circumstances it is a departure from a norm or standard. The situation develops from a technical perspective when prices continue to push higher while an indicator fails to reach a new high.
This is a symptom of an advance (decline) that is losing momentum. While indicators can remain overbought for an extended period of time or a stock/index may merely drift in a choppy range while the divergent (in this case overbought) technical posture is worked off, it pays to be aware of when these type of situations do develop.
The chart below of the S&P 500 highlights in green when the index pushed to a new high for the move while the stochastic indicator did not accomplish the same feat. As we can see, the end result was not particularly encouraging on the previous two occasions (March and August 2002).
While the examples in the chart above are rather ugly, the divergences came within the context of the firmly establish bear trend. This was suggested by how the S&P index traded at its short (20 day ema, blue line) and intermediate (50 day sma, red line) term moving averages. Notice how the subsequent rebound attempts stalled at the averages.
Before you become overwrought, however, keep in mind that this situation merely implies that the market is due for a pause following the robust October rally. A look at the chart below of the S&P from one year ago ended with a less chilling result.
An indication last year that there was potential for additional progress is seen in the limited nature of the pullback. The index held near the previous corrective lows from earlier in the month and the 38% retracement of the advance (1047.25). Note also that the S&P was able to quickly stabilize back above the 20 and 50 day averages.
Overbought/divergent indicators do not always lead to sharp moves to the downside but they do suggest being prepared for that possibility. If it does develop, identify supports (retracements, moving averages) and watch the price action near these levels for an indication of the underlying strength of the market. -- Jim Schroeder, Briefing.com
10:59AM Sector Watch: Semiconductor : -- Technical -- Group has weakened after setting a minor new high for the month. Pacing the way on the downside are: TER -5%, MXIM -4%, LSI -4.9%, ALTR -3.9% and AMD -3.2%. Bucking the bias are MU +1.3% and MOT +1%. Technically the SOX index (294) has struggled over the last six session near the 300 area. With momentum weakening and indicators potentially forming a divergence, it raises the possibility that a corrective pullback will develop. Takes an intraday rebound through 300/301 to help neutralize the current weaker bias. Next supports are at 285 and 282.
10:34AM Market sees 87% probability of easing : After this morning's Chicago PMI data, the fed funds futures now discount an 87% probability of a 25 bp easing at next Wednesday's Fed meeting. Regardless of what anyone thinks about the economy, we cannot think of any past case where the Fed has gone against such a strongly held market conviction.
finance.yahoo.com^SOXX+ALTR+AMAT+AMD+BRCM+CHPC+CSCO+INTC+KEI+KLAC+LLTC+LSCC+LSI+MOT+MU+MXIM+NSM+NVLS+OIIM+TER+TXN+UMC+VSH+XLNX+^VIX+^IXIC+^SPX+SMH&d=t
Don, I tried to check out the Banc of America notes on the semi equips earlier today but you have to be a paying client to get more than that Briefing.com blurb.
RtS |
