Hi Don,
Several thoughts on the NAZ vs its many scenarios.
It would be a very quick top if January's high was not to be at least approached with a second top that failed.
With Intel having corrected,after announcing a quarter Of "significant improvement year over year" in a historically weak quarter,after a record quarter in Q4,,it is difficult to expect that the top has gone in.
Craig Barrett has said all along he hasn't seen business come back yet - doesn't sound too toppy to me.
It is possible that the good times are not due yet, and this market has gotten ahead of itself (much like in 1998).
My most plausible scenario is that the many cup and handles developing are quite persuasive in making a case for the general market to increment up to new levels.I reserve the option of saying the handle could take 5-7 weeks yet
Rotations occur during market tops.As left behind sectors tease new highs, as further distribution is achieved by lagging sectors - in 2000 Oracle was still rocking when the Semi's were crashing and burning.
G's shipments vs equipment orders suggest a lag in SCE stocks business not a top.
Last but not least, last quarter had a strong run up during a prewarnings period that had an impressive absence of companies prewarning (indicating that they would be achieving their past guidance revenue numbers).
Generally when above guidance numbers were heralded in webcasts, the stocks were met with waves of selling.It was the old: "buy the rumor - sell the news" - last quarter.
This entire quarter has experienced a "negative barrage of analysts" - all expounding "valuation worries".Most have recommended a flight to companies that "are quality".
I propose most SCE stocks have very limited debt (if any)and large cache's of cash.Not bad quality if we are to believe the GLOBAL RECORD of chip shipments will generate equipment orders.
This "fear of valuation" just as a still rather anemic level of revenue has quite impessively resulted in profit levels, that are just recently ushering in actual profits.
It is yet clear what level of profits can be achieved by these firms, as they have rightsized,consolidated and IN GENERAL are operating with more than 50% employee headcount reductions.
Coupling this "FOG" that has settled in over our favorite sector - SCE's - with the many cup and handle patterns out there in major indices,I'm thinking Q1's actual earnings may very well surprise nicely (similar to INTC"S mid quarter conference indicated).
The surprise may well be rewarding to those who bought the dip this quarter vs those who bought the rumor last quarter.
The opposite action of the masses is often the most profitable.
I'm thinking solid earnings will surprise and create buying demand as earnings are announced.
I can't think of a more perfect scenario,than to have surprise buying pressure at the completion of a cup and handle pattern of our largest indices.
Couple this with a record short interest out there,that can best be described as "a retail buyer's position" and we may well have a squeeze that will fleece JQ6pack as the breakouts of the handles pop up upon earnings "above expectations" announcements.
The Russell has lead this 12-14 month run up and it just popped back up over 600 last week.The mid cap 400 is running right behind it.
I can't believe this market is topping with out the leaders testing new highs and anemicly breaking them as the "Big Caps" and "Blue chips" at least get their turn in the sun.
Tops take time - this would be a record short top and one with just small cap and mid cap participation - very unusual and I'm not able to buy into these GURU's all of a sudden getting religion because they're calling an early top- one which didn't have complete rotation of most sectors.
Nope I say we're setting up for a pop.Your wonderful charts have proven that so well.
Our best key will be to watch revenue growth as this quarter's sales come in.With GDP coming in as strong as it is for at least the last two quarters - all of which has occured on a record low inventory to sales ratio for our manufacturers - it just smells like Wall Street is designing a fleecing,at the expense of those investors who've learned that the short side is the winning side.
My bet is a top won't happen till we rehear an old word that has yet to be labeled on the huge level of shorts out there - capitulation.
That's another way of saying paniced covering.
JMHO and thank you for your excellence in analising what we at least know to be truthful.<smile>
Bob |
