No doubt about it, Yahoo, Lycos and several other internet leaders were very impressive today. The key word being "today". I wouldn't get too brave in this market (going long that is).
But on the other hand, I wouldn't get too brave going short on some of these stocks (such as cisco or dell or others that have been beaten to a pulp), especially on days in which the Dow OPENS down 100+ or the Nasdaq down 40+. These can turn on a dime.
However, internet stocks have already made another huge run in the past month and are begging for any excuse to be taken out and shot again.
My guess is that these stocks are being propped up while we wait for the Yahoo earnings report support. Once it's out, and I don't care what they report, YHOO will lead the internets and the Nasdaq down another 50 points or more.
Think about it, the overall economy is finally showing legitimate signs of serious stress. Yet, in the last month, Yahoo bounced off a low of around 60 to a new all time high of 134. If phenomenal earnings aren't built into that run, then I don't know what is.
I strongly believe this will be the mother of all sell on the news.
And frankly, I fully expect that YHOO WILL beat the estimates, and probably have a good conf. call. But in this market, I doubt that's enough. The market is just waiting for any excuse to tank the internets.
Don't be surprised if they all test their recent lows.
If you need convincing, just ask yourself "what exactly is different today as opposed to August 31?". And what (besides the improving tone of the Nasdaq and Dow during September) would really account for a 100% move in several of the leading internet stocks?
Now that the tone of the Nasdaq and DOW have reverted to very bearish, what will CONTINUE the drive them up? Earnings, oops I mean less than expected losses?.
During this past month:
Lycos bottomed around 20 then ran to 40.
CMGI " 36, > 62.
Yhoo " 60 > 134
RNWK " 19 > 45.
aol " 80 > 110.
and the list goes on.
On the positive side, many will argue that Internets are not affected by Japan, S. America and other global economics.
Maybe not as much as IBM, Intc, Gillette, Coke, McD and the other Dow stocks, but these are the companies whom they rely on for advertisement revenues. Guess what the Dow multinationals will be slashing in these lean times? Can you say overhead and advertising budgets?
Only two days to see if my predictions are close, or if I'm totally off.
For the record, I'm short Lycos (from 27)
Short YHOO (from 125), XCIT (from 40),
just covered ELNK,RNWK, NSOL and MSPG for decent profits.
I hope you don't get suckered in. Any long money is as good as playing the ponies. The odds are seriously against you.
Regards.
Jose.
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