Mornin all, looks like Dell, HLIT and a few more bad apples are prepared to crash the rally party again. It really does pay to be a daytrader in this mkt....
Found this article, a must read IMO....
financialweb.com
Here We Go (Up) Again
By David Jennings
Wed Oct 04, 2000 3:30 PM ET
3:30 p.m. ET: It's been a slugfest today between the bulls and bears. The bulls are winning from the standpoint that the major averages are in plus territory, but market internals paint an altogether different picture. Market breadth is going to narrow significantly during today's Crunch Time action.
How will the market technicians interpret today's volatile session? Will they raise Nasdaq's bar of support by 100 points? 200 points? Will they lower resistance by 100 points? 200 points? Will everyone take their commentary as the gospel?
One thing we know about traders (well, the folks who are especially good at this kind of business) is that they know how and when to take what the market gives them. EMC Corp. (NYSE: EMC), the leader in data storage, traded to 85.75 this morning and is moving in the late going at 92 and change. Inktomi (Nasdaq: INKT) sold down to 94, and the shares are trading at 105 and change. That's quite an intraday spread for pricey stocks the pundits maintain are overvalued tech shares due for a plunge. The put option writers are mopping up.
We also realize some pundits display an apparent need to see others experience Calvinist retribution. Some have been expressing this need throughout the long bull market that began in 1991.
As 3:30 nears, we're seeing double-digit advances for the market's tech leadership: Broadcom (Nasdaq: BRCM), I2 Technologies (Nasdaq: ITWO), Emulex (Nasdaq: EMLX), and Extreme Networks (Nasdaq: EXTR). Dozens of other tech stocks aren't far behind them.
Those seeking Calvinist retribution for the techo bulls will have to wait at least one more day.
Market Snapshot & Interactive Movers
2:55 p.m. ET: After the 2:00 head fake that moved the Nasdaq Composite Index back into minus territory, it appears short covering created another tiny rebound into the green. Can you see how the market's ebbs and flows are due in part to short selling activity?
At 2:00, on-balance volume on the Nasdaq was plus 56 million shares. By 2:30, the balance had shifted to minus 103 million shares. The NYSE also experienced a similar selloff.
Who's doing all this short selling? It's Nasdaq market makers and NYSE specialists, intelligent speculators, floor traders, and the trading departments inside large brokerage houses, hedge funds and banks, that's who.
People move prices, and people with more experience and access to more capital and information move money from the pockets of the inexperienced into the pockets of those with experience and access.
The intraday volatility we're seeing is due to increased trading activity. The NYSE will end regular trading with turnover surpassing 1.1 billion shares, and the Nasdaq will probably move 2.1 billion across the tape.
Market Buzz has spotted another semiconductor stock trading in a "box" or channel pattern. Vitesse Semiconductor (Nasdaq: VTSS), one of a number of companies producing power-saving (but more expensive) gallium arsenide chips for the telecommunications market, has been moving in a range of 80-90 since the first week in September.
Regular readers familiar with our liking for school stocks, such as Education Management (Nasdaq: EDMC), should be informed that Apollo Group (Nasdaq: APOL), currently moving at 41, up about a point and change, reports earnings tomorrow morning at 11:00 Eastern Time. The consensus earnings forecast for this company, whose stock peaked at $47.50 a couple weeks ago, is $0.26.
Market Snapshot & Interactive Movers
2:05 p.m. ET: The Nasdaq Composite Index is up 17 points just before 2:00, but the breadth is still decidedly negative for the 18th time in 23 sessions. Major pharmaceutical stocks have sold off.
The traders know today's market is developing into an either/or situation. A number of Nasdaq stocks have traded higher in the past hour or so, and the market makers and intelligent speculators know those pops are showing up on the screens of all the players.
The chat room traders are tempting the newbies with messages suggesting even higher prices later in the day. If prices move sideways for too long, however, the professionals who usually have access to larger amounts of capital will begin going net short, and we will see another fade during Crunch Time.
A check of FinancialWeb's market index page shows small-cap stocks are actually performing better today than their large-cap brethren.
There's talk now about CMGI (Nasdaq: CMGI) being set up for a big move, something like a triple from its current price of 24. Well, a triple's a triple, but we recall CMGI's run-up from a split-adjusted 50 to 150 from November to January. A triple to 72 would still leave this Internet blue chip trading at 50 percent from its all-time high.
Meanwhile, the market continues to give up on Dell Computer (Nasdaq: DELL), now moving at 27.
Market Snapshot & Interactive Movers
1:35 p.m. ET: The market makers and intelligent speculators seem to have determined that, after covering their short sales, some buyers would show. So they rallied their stocks after 12:30. But for how long?
On-balance volume has switched to the upside on the NYSE and Nasdaq department stores. Well, excuse us, we meant to say a formal exchange where everyone takes things seriously. They take things seriously at used car lots, or so we've been told.
While the market rallies a little, let's discuss some stocks belonging to specific subsectors displaying similar chart patterns.
Starting with a chart that says the upside trend is still your friend, we find that Altera (Nasdaq: ALTR) and Xilinix (Nasdaq: XLNX), two companies that make programmable semiconductor circuits, have positive year-to-date charts. Analog Devices (NYSE: ADI), which makes digital signal processors (or DSPs), and Keithley Instruments (NYSE: KEI), one of these smaller "once and future" fiber optics stocks, also sport patterns friendly to the bulls.
Next, we come to three companies involved in the growing market for flash memory semiconductors. Turn off the device, and these integrated circuits still store the data, such as digital pictures inside digital cameras. SanDisk (Nasdaq: SNDK), M-Flash Systems (Nasdaq: FLSH), and Silicon Storage Tech (Nasdaq: SSTI) have traded in a fairly wide channel since the Great Tech Plunge of 2000.
In the case of a channeling pattern, you either trade the intermediate-term upswings and downswings, or you trade the breakout or breakdown.
Downtrending chart patterns are displayed for Asyst Tech (Nasdaq: ASYT), which makes semiconductor production equipment, GSI Lumonics (Nasdaq: GSLI), a diversified laser equipment maker, and Kopin Corp. (Nasdaq: KOPN), which makes gallium arsenide circuits and flat panel displays. None of these stocks has shown true signs of wanting to bottom, much less a kind of sideways pattern on low volume that would indicate some accumulation by major operators.
Finally, we review a chart pattern known as a "triple bottom," which now is being displayed for Photronics (Nasdaq: PLAB). The share price has practically made a round trip from where it was trading on a split-adjusted basis at this time last year.
Market Snapshot & Interactive Movers
11:55 a.m. ET: This is turning out to be another session when some "unseen hand" flips the sell switch at precisely 11:00. Thirty minutes later, and the Nasdaq Composite Index moves to its low for the day.
More than 850 million shares have changed hands at 11:30 on the Nasdaq marketplace. That kind of volume is predicting a two billion-share day by the close of regular trading. And yes, downside volume is expanding and the breadth is running almost two to one in favor of losing issues.
And yes, again, although declines are outnumbering advances on the NYSE, downside volume is only slightly ahead of upside turnover. So we know where the money is: It continues to flow from all the sales of tech stocks.
We have to correct ourselves about the Yahoo! (Nasdaq: YHOO) earnings release, which we reported in Monday's Dave Due Diligence column as scheduled for today. That bit of information was culled from a respected financial news source, none other than Bloomberg TV. Yahoo! actually reports on Tuesday, October 10.
After reaching 92 this morning, Inktomi (Nasdaq: INKT) has moved back through the 100 level. The put option writers are busily phoning in orders to their brokers. They are betting this maker of Internet software will beat the consensus estimate of $0.05 on October 26. They're expecting a rally prior to the October 20 options expiration.
The magic words "fiber optics" continue to create a hypnotic effect on speculators. Oplink (Nasdaq: OPLK), which makes fiber optic components, was priced last night at $18 a share and opened for trading this morning at about $34. The company's list of customers includes some mega-cap names such as Lucent Technologies (NYSE: LU), Cisco Systems (Nasdaq: CSCO), and JDS Uniphase (Nasdaq: JDSU). Trouble is, however, practically every newbie fiber topics company coming to market lists these three companies as customers.
Biotech stocks have turned lower, but the international drug producers are holding on to their gains as Lunch Period nears. Schering Plough (NYSE: SGP) is moving at 48, up a point and change. Semiconductors stocks continue to trade in the green, but the price action isn't all that impressive for them.
Energy issues are mostly lower. The market wants us to believe the U.S. energy crisis has been resolved, but the reality is that it has only just begun. The Internet is gobbling up every watt of electrical power the plants can produce on a 24/7 basis and screams for more watts with each passing day.
May you live in interesting times.
Market Snapshot & Interactive Movers
11:00 a.m. ET: After a weak open, the Nasdaq Composite Index has begun to creep up. Is it a full-blown buyer's rally or just a case of ordinary short covering? Check the market internals for answers.
The total of trades on downticks is expanding on Nasdaq; it's about even on the NYSE, but overall breadth remains negative for both markets. Those green arrows can be deceptive in a market that still says it wants to go south.
Although Ariba (Nasaq: ARBA) has rallied this morning, MicroMuse (Nasdaq: MUSE) has given back 14 points. Sanmina (Nasdaq: SANM) is up a point to 97, but BEA Systems (Nasdaq: BEAS) is off two to 84.
To find out how hard it is to trade up in a declining market, try climbing a down escalator. Try swimming against the tide. Try flying a kite on a windless day.
Try asking the specialist handling Procter & Gamble (NYSE: PG) why he continues to rally his stock, which is approaching the 70 level. We all know that P&G is a tired old grandma of a consumer products company with slim profit margins compared to the visionary Oracle (Nasdaq: ORCL). Yet Oracle is drifting another 10 percent lower today.
The specialist knows where the money is flowing, and he knows P&G is a good candidate when the market gets defensive. What better way to attract potential buyers than by bidding up the price?
Market Snapshot & Interactive Movers
10:25 a.m. ET: Who said the earnings warnings season was over? Must have been a naive chat board newbie. The sell orders are taking the majority of stocks lower in the first hour.
Market breadth is running nearly two to one in favor of decliners on both the Nasdaq and NYSE. We see a little nibbling in some major pharmaceutical stocks on the Big Board and selected biotechs on the Nasdaq. A few semiconductors are trading green, but it's nothing to get too excited about.
Sun Microsystems (Nasdaq: SUNW) has broken through its chart channel of 112 to 120. Shares of the big computer server maker are now moving at 102. Your guess of a short- or intermediate-term bottom is as good as ours.
Oracle (Nasdaq: ORCL) is practically in free-fall. The market's sell-side analysts are expressing doubts that Larry Ellison's army of super salespeople can sell enough of its B2B commerce software to make next quarter's numbers.
The protracted decline of Microsoft (Nasdaq: MSFT) looks like the end of the run for one of the most successful stocks during one of history's greatest bull markets. This has to have a devastating impact on the portfolios of many of the major large-cap mutual funds. Are we expressing tearful good-byes to some old favorites who made the Nasdaq marketplace a beacon for many aspiring millionaires?
Whatever lies ahead longer term, right now we're seeing shares of large-cap companies getting dumped. EMC Corp. (NYSE: EMC) is down six points to 88.
Market Snapshot & Interactive Movers
9:30 a.m. ET: The technicians have the Nasdaq marketplace surrounded. The support and resistance levels, or what Richard Ney would call significant "10" numbers, are exerting their usual psychological influence.
The financial media and their echo chambers are filling up time between commercials talking about support and resistance numbers for the Nasdaq Composite Index. Now that the tech market's chief indicator has fallen below 3,500, the support is being placed at 3,250.
Or is it 3,275? It all depends on which technician's newsletter you rely on for direction. If it's a paid subscription, you most likely will heavily rely on it. After all, you want to get your money's worth.
We've seen this movie before. It's called "The Self-Fulfillling Prophecy," starring Nasdaq market makers, media pundits, newsletter writers, sell-side brokerage house analysts, online columnists, dead-tree columnists, and a cast of thousands inhabiting the chat rooms and offices watching computer screens.
If the Nasdaq's bellwether average continues to drop, the technicians will simply lower the bar, or the level of true support. As the average approaches this bar, the technicians will then issue comments about the true support level actually being 100 points lower. To make it more interesting, some will say 150, or 125.
Lights, camera, action! |
