To: Jim Willie CB who wrote (8082 ) 10/15/2000 12:07:13 PM From: Mannie Read Replies (1) | Respond to From Pption Advisor Newsletter....optioninvestor.com
optioninvestor.com
optioninvestor.com
optioninvestor.com
Volume came back into the market this week with a vengeance. The
Nasdaq has been staging two billion share days one right after another
and the NYSE notching one billion repeatedly as well. Thursday was a
very good example of a capitulation day with decliners beating
advancers 3:1 and closing at the low of the day. This came after a
long stretch of seven losers out of the last nine days. Oversold,
oversold, oversold. Period. Saddam Hussein could have bombed Kuwait
on Friday and not driven the markets down any farther. This can be
viewed by bulls as beginning of the Fall rally while the bears are
looking at it as just the ninth bear trap rally since September 1st.
The thing that makes this rally look so convincing is the major
capitulation on Thursday on high volume but isn't that the same thing
that causes relief rallies?
Now before you start firing off that hate mail for casting doubt about
the chances of a continued rally, please note that I believe it is
the real thing but one day does not make a trend. Further confirmation
would be a break and hold over 3400. Either way this was a tradable
rally and it has all the earmarks of continuing for a couple days.
Everybody expected it to collapse Friday afternoon and there was
not even any hesitation. It was Friday the 13th after all. The relief
rally sentiment was so positive after the sell off that not even a PPI
at almost twice the expected amount could not hold back the buyers.
The headline PPI number at +0.9%, the highest in seven months, was
much higher than the +0.5% analysts had expected and the core rate
at +0.3% was three times the expected +0.1%. Still the buyers did
not care. Retail Sales increased 50% higher than expected at +0.9%
versus the +0.6% forecast. Still the buyers did not care. The lure
of cheap stocks was too much to ignore.
With the Dow dropping for its fifth largest point loss ever on Thursday
and the Nasdaq down -1200 points in the last six weeks the bounce was
inevitable. Does this mean the Fed is really dead? Even with raging PPI
and Retail Sales they will not do anything until after the election
and the next move may still be a cut but it may be a long way off.
Remember, a lot of the selling pressure came from global economic
conditions. The price of oil moderated only slightly on Friday and
further flare ups in the Middle East will only make matters worse.
It was rumored today on the news that Saddam is moving troops towards
Israel and analysts have not ruled out a production cutback by Iraq
as a way to force the oil issues and gain concessions in negotiations.
The Euro dropped to another new low of $.86 to the dollar and the
falling Euro was the main reason the multinationals were losing money.
The concept that the outlook is improving for the fourth quarter is
being questioned and analysts are already paring down estimates for
earnings. Add in the PPI and Retail Sales and things may not be as
bright as the market indicated on Friday.
Part of the basics behind the strong move came from strong earnings
from some leading tech companies. Gateway posted earnings that only
met analyst expectations but said that it's third quarter profit rose
+35% and sales rose +16%. The reason for the jump in the stock price
on earnings that only met estimates was really Dell. With Dell warning
again that things were not going well the Gateway positive statements
were a breath of fresh air. Gateway soared +9.48 to close at $53.11.
PMCS reported earnings of +.31 vs estimates of .26 and the stock
jumped +32 on news that they still have a significant backlog of
orders and components were freeing up. Juniper Networks also beat
estimates with revenue up +78% over the previous quarter. JNPR is
breaking into Cisco's customer base with faster routers and newer
technology. Juniper was upgraded by everybody who had a microphone
and gained +29 after posting +.17 vs estimates of .09. The PE
for JNPR before the earnings announcement was a record 2,310. The
quickest way to reduce that is by more than doubling your earnings
every quarter but 2,310, wow!
-cont.-
