Don, my worst case scenario calls for only a 20% drop from here for the SOX. On the other hand if the bad news is priced in the upside is sure a hell of a lot more than 20%.
Thanks for the article. Here is today's summation from Briefing.com for those who want to read it:
Close Dow -7.49 at 8663.50, S&P -1.73 at 916.07, Nasdaq -20.86 at 1314.91: As to be expected, there wasn't a great deal of interest in today's market as the appeal of a long weekend took precedence over trading activities on this, the Friday before Labor Day... That's not to say, though, that there wasn't a lot happening in the market today... In fact, there were plenty of developments on which to focus...
In particular, there were the disappointing mid-quarter updates from Novellus Systems (NVLS 24.46 +0.17) and Sun Microsystems (SUNW 3.69 -0.14), there was BellSouth's (BLS 23.32 -0.93) reduced earnings guidance for 2002, there was Alan Greenspan's opening, and non-market moving, remarks at a Fed conference in Jackson Hole, and there was a batch of better than expected economic data... Though the market started the session on a negative note in response to the disappointing guidance from NVLS, SUNW, and BLS, it quickly regrouped, comforted by a sense that a double-dip recession isn't in the offing...
The factors contributing to that positive assessment included the report of a 1.0% gain in personal spending in July, a Univ. of Michigan consumer sentiment survey that was largely in line with expectations, and a stronger than expected Chicago Purchasing Managers Index for the month of August, which served as a hopeful indication of national manufacturing trends... That batch of data, all of which were released before 10 ET, ignited a fire under a number of blue chip industry groups, particularly those that are economically-sensitive, and provided a welcome lift to the Dow and S&P... At one point in the afternoon session, the Dow was up as many as 110 points... The Nasdaq, for its part, trailed the action in noticeable fashion throughout the day as it was held back by a weak showing from the biotech and telecom-related shares...
Strikingly, at the Dow's apex, which occurred around 14:15 ET, the Nasdaq was up a mere 2 points... The blue chip rally, however, fell by the wayside in the late-afternoon in a broad-based retreat that was led by the technology sector... Most likely, the late pullback was driven by traders who either preferred to carry relatively flat positions heading into the long weekend or who were betting the market would fall further after the holiday... By the closing bell, all of the major indices were back in red figures...
For the Dow, its weak finish left it with a fifth consecutive monthly loss-- something it hasn't done since 1981... Volume was a scant 907 mln shares at the NYSE, and it just barely topped 1.0 bln shares at the Nasdaq... DJUA -1.4%, Nasdaq 100 -2.0%, Russell 2000 -0.9%, SOX -1.4%, S&P Midcap 400 -0.6%, XOI +1.1%, NYSE Adv/Dec 1812/1380, Nasdaq Adv/Dec 1531/1732
2:19PM NVDA volume surges on SEC news; breaks to fresh session low 10.04 -0.34:
2:15PM NVIDIA CEO/CFO certify SEC reports; receives investigation letter (00C0) 10.27 -0.11: The certification noted that NVIDIA had received a letter dated August 15, 2002 from the Corporation Finance Division of the SEC containing comments on NVIDIA's filing on Form 10-K for fiscal 2002 and Form 10-Q for the quarter ended April 28. The letter notes that the Division of Enforcement commenced an investigation regarding certain matters which may be related to the company.
12:31PM Agilent Profile : Provider of test equipment for the telecom and life sciences industries. Expected to lose $0.93 this yr and turn profit of $0.31 next yr (p/e 44); price/sales 1.1x. Book value $10.71 per share. YTD change -52%.
12:23PM Agilent leads new 52-week low list : Agilent (A 13.68 -0.52) tops the list of stocks breaking down to new 52-wk lows today. Stock has been in freefall since breaking critical support at $15 on Tuesday. Agilent shares now trading at an all-time low.... Joining A on the new low list today are Fleming (FLM 9.83 -0.88) and Chartered Semi (CHRT 11.99 -0.91).
11:08AM Agere Systems downgraded by Moody's (AGR.A) 1.50 +0.04: Stock seems to have shrugged off Moody's downgrade this morning of its subordinated convertible debt to B3 from B2; agency said the action reflects expectations that the co is likely to continue incurring operating losses and consuming cash as it contends with the prolonged industry downturn.
1:00PM Chart Watch : In a stock brief from last week we highlighted a number of stocks that had staged breakouts or were nearing important levels. The subsequent action has, however, been disappointing. The lack of volume that accompanied many of the moves higher and the fact that so many have pulled back to or through their respective breakout levels is a significant concern regarding the overall health of the market recovery.
The chart above of IBM (75.7) illustrates what has befallen many of the August leaders. Once it edged above its 50 day ema (purple line) and the top of its two month trading range top it developed solid follow through interest. From a positive standpoint above average volume was noted during the move (blue line is 65 day average) with volume slowing during the slide. However, it is now back flirting with moving average support (75.1) that is just above the top of the trading range in the 74.30/74 area. Without a continued stabilization above this area short term and follow through gains on expanding volume, the case can be made for a run back to the summer lows. -- Jim Schroeder, Briefing.com
9:10AM Stocks To Watch : The market is hanging on to a modestly weaker bias amid quiet pre-holiday trade. Setting the tone for the morning are the stocks that held Mid-Q updates last night. Novellus (NVLS -3.2%) lowered its outlook for Q3 revenue, earnings and bookings due to a significant push-out of two key customers. The news of late from the Street has been generally negative and this morning Merrill Lynch has downgraded several names in the sector (NVLS, LRCX -2.6%, AMAT -1.7%, KLAC -2.7%). Firm said expects weakening orders as well as more aggressive cancellations and push-outs; checks indicate increasing likelihood of pushouts and cancellations of equipment orders, particularly from foundries and second-tier Asian semi manufacturers. Commentary from Sun Micro (SUNW -5.2%) during their call was not encouraging either as they see no improvement in IT spending and indicated Q1 revenue will likely come in below the consensus estimate.
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