Thanks Don and Cary. Agree with both of you although I do believe we could still head a bit lower before a final bottom. Even so it is hard to know when a bottom is in even when it is in so I could miss it.
More from Briefing.com: General Commentary - While the blue chip indices powered higher for a second straight day, the Nasdaq Composite failed to keep pace. The decline was insignificant (less than one point), but the lousy performance of the key SOX index and the breakdown in several large-cap leaders was not.
Let's start with the SOX. We noted on this page yesterday that if the tech bounce were to last more than a couple days, the bellwether semiconductor index needed to mount a rally through resistance in the 270-276 area. It didn't come close. Index started heading lower from the opening bell and never found any buyers. Broadcom (BRCM 11.86 -2.04), Micron Tech (MU 12.55 -0.84), KLA-Tencor (KLAC 28.41 -1.60) and Applied Materials (AMAT 11.74 -0.55) led the chip group lower. Failure to test first level resistance not an encouraging sign.
But chips weren't the only stocks that were down. Briefing.com was also disturbed by the weakness in large-cap/high-profile companies such as Cisco (CSCO 11.36 -0.60), Oracle (ORCL 8.29 -0.30), IBM (IBM 62.02 -0.99), Siebel Systems (SEBL 6.49 -0.44), SAP (SAP 12.17 -0.44), Veritas (VRTS 15.11 -0.98), QLogic (QLGC 26.58 -3.25), Brocade (BRCD 8.33 -2.04) and Hewlett-Packard (HPQ 12.07 -0.77).
A slumping SOX index and bearish action in sector leaders is not the ingredient for a sustained recovery try. Barring a big positive surprise, looks like indices will have to spend more time probing for a bottom before launching a noteworthy advance.
Robert Walberg
6:50PM ATMI warns for Q3 (ATMI) 13.70 -0.67: Sees a loss of $0.05-0.10 vs Multex consensus of a $0.01 profit, revs $53-55 mln vs Multex consensus of $60.4 mln.
4:21PM Solectron matches estimates, issues guidance (SLR) 2.19 -0.01: Reports Q4 (Aug) loss of $0.04 per share, in line with the Multex consensus of ($0.04); revenues fell 13.4% year/year to $3.12 bln vs the $2.96 bln consensus; expects Q1 EPS of break-even and sales of $2.8-$3.1 bln, vs consensus of a loss of $0.01 and $3.0 bln.
2:59PM Chart Watch Semi Index : The SOX index advanced an eye popping 7% on Wednesday with the move from low to high this week a rousing 12.7%. Unfortunately, the action today for the semiconductor sector has been disappointing.
The substantial upswing provided important leadership for the overall market and likely a sense of comfort to some that the seemingly unrelenting selling pressure had been broken. However, while the final numbers were encouraging, the volume did not suggest that fresh cash was moving into the marketplace. The lack of follow through off the open today for the semi sector reflected the limited confidence that traders currently have in the sector and likely the market in general.
While there were some negatives this morning (TXN and TSM downgraded, MU-- downgraded by S&P; reports INTC talked to Japanese chipmakers about making memory chips), the ease with which the recent impressive gains were cut supports the theory that yesterday's buying binge was related to a short covering/technical bounce.
The chart action bolsters the view that the gains were more likely merely corrective in nature. The index itself failed at the 38% retracement of the Sep decline which is a repeat of the bounce that followed the Aug/early Sep slide. As for the individual components, a number of them (INTC, MOT, KLAC, AMAT, NVLS, LLTC, ALTR, XLNX, LSI) failed right at their 20 day ema (short term trend indicator).
For the near term, the SOX index will need to sustain a breach of resistance at 255 to improve the bias. Further out it takes follow through beyond the 272/275 area (20 day ema, early Sep low) on improved volume to argue for a more sustainable advance. Failure leaves the underlying bear bias intact with a breach of this week's low exposing next supports at 228/226 and 216/215. -- Jim Schroeder, Briefing.com
11:47AM Chart Watch CSCO : While the overall market is performing well following yesterday's impressive advance, one issue that has significantly diverged is Cisco Systems (CSCO 11.57). A warning from telecom equipment maker Nortel (NT -18.5%) and commentary from Goldman Sachs have weighed.
Goldman suggested that the Oct quarter will be more difficult than the previous due to weak enterprise spending (highlighted Japan and Europe), the difficult carrier market, and mixed messages from checks. Indicated that their estimate of flat sequential sales is achievable, but the back end loaded nature of the quarter makes it too early to determine if they will meet the estimates.
From a chart perspective CSCO is of interest as it has once again slipped back toward the lower end of its multi-month trading range. Initial support, which was tested today, is at 11.45/11.42 (Sep/July lows) with the lower end of the range at 11.14/11.04 (Aug low/Sep 2001 low).
The weekly chart above shows the supports zones of interest. A breakout beyond these levels initially exposes the Oct 1998 low of 10.28 with a chart barrier of interest thereafter at 10. On a short term basis it will take a recovery back through the 12.60/12.67 area to neutralize the current negative trend.
-- Jim Schroeder, Briefing.com
2:16PM NVIDIA drops following option swap announcement (NVDA) 8.77 -0.60: -- Update --
2:03PM FOMC wanted to convey concern for economy : The FOMC minutes for the Aug 13 meeting did indeed indicate that policy makers were becoming more concerned about the prospects for the economy, as was indicated by their decision to shift to an easing bias. Interestingly, in discussing the possible need for future actions, the FOMC said that a rate cut could be prompted by "a further significant weakening in economic prospects--for example, that might be associated with additional deterioration in financial markets". This statement suggests that financial market weakness alone could be enough to prompt an easing.
1:06PM Brooks-PRI Automation down on talk of job cuts (BRKS) 11.83 -0.52: Sources telling us that Banc of America is saying it suspects BRKS will cut jobs today by about 15%.
1:02PM Broadcom hits new 52-week low (BRCM) 11.87 -2.03: -- Update -- Stock hits a new 52-week low; this morning's estimate cuts for Salomon Smith Barney at least partly to blame, though a recent acceleration of the selling has traders looking for other reasons as well. Salomon now sees a 2003 decline in worldwide set-top boxes of 30%, double its previous estimated decline; cuts 2003 BRCM estimate to $0.03 from $0.29 (consensus $0.28).
12:59PM Microsoft (MSFT) 46.37 -0.14: Stock seems to be getting a small boost after announcing their earnings release date (Oct 17); while this may sound like a trivial event, we hear some traders are interpreting this as meaning the risk of a preannouncement has passed.
12:40PM General Electric drops following cautious comments from CSFB, JP Morgan (GE) 26.71 -0.29: -- Update -- Stock has sold off following cautious comments from CSFB and JP Morgan regarding the quality of Q3 earnings; CSFB says that operationally the co may not have made $0.41 for Q3.
11:59AM Brocade plunges on lack of guidance, false Solly rumor (BRCD) 8.89 -1.48: Stock has tanked in the last 20 min on heavy volume following their presentation at the Banc of America investor conference; while we're told the presentation was generally positive, we are also hearing the negative reaction was due to the fact that the co declined to give guidance, as well as a false rumor that Salomon Smith Barney was making negative comments on the co.
11:52AM Micron outlook revised to negative by S&P (MU) 12.75 -0.64: -- Update --
11:40AM S&P 500 edges towards best levels of session : -- Technical -- Index edges towards its best levels of the session -- look for modest initial resistance at 854 followed by additional overhead in the area of 859. To the downside, watch for initial support at 848 followed by an additional floor at 842.
11:24AM General Electric: reaffirms 2002 forecast, says environment much tougher than planned (GE) 27.72 +0.72:
10:35AM Sector Watch: Semiconductor : The semi index (SOX 255) failed to build on yesterday's impressive sprint and has succumbed to profit taking in recent trade. Components on the defensive this morning include: BRCM (-5.4%), MU (-3.2%), KLAC (-2.1%) and LLTC (-1.9%). Next supports for the index are at 252/251 and 248. Rebound back above intraday resistances at 257 and 259 implies recent dip will be short lived. Next resistance at 262/263 with a stronger ceiling in the 272/274 area.
10:03AM Nasdaq Composite Intraday : -- Technical -- Index runs to resistance in the 1237/1240 area (38% retracement of Sep slide/chart) in early trade and while intraday support in the 1225 area remains intact the bias is expected to remain favorable. Next resistances are at 1249/1251 and the 1258/1260 area
9:24AM Intersil could be pressured by Intel/Linksys talks - Needham (ISIL) 13.59: Needham says they have come to learn that INTC is currently in discussions with Linksys over a possible WLAN marketing agreement; ISIL is currently the primary supplier of 802.11b chipsets to Linksys, and should INTC aggressively market its WLAN chipsets to 3rd party equipment vendors, ISIL's WLAN biz and margins could face increased pressure in the longer term.
8:58AM Texas Instruments downgraded by Thomas Weisel (TXN) 16.35: Thomas Weisel downgrades to MKT PERFORM from Attractive due to the stagnant IT spending environment; cuts FY03 est to $0.60 from $0.75 (well below consensus of $0.73).
8:53AM Fairchild Semi, Intl Rectifier downgraded at Thomas Weisel 9.85: Thomas Weisel downgrades FCS and IRF to MKT PERFORM from Buy due to weak end-mkt demand and further avg selling price erosion.
8:43AM RF Micro Device upgraded at JP Morgan (RFMD) 6.23: JP Morgan upgrades to NEUTRAL from Underweight following positive preannouncement on 9/24; in addition, firm cites greater customer diversification and strengthening end demand; raises FY03 est to $0.13 from $0.07 and FY04 to $0.21 from $0.17.
8:32AM Cisco Systems: Oct quarter will be challenging - Goldman Sachs (CSCO) 11.96: Goldman Sachs continues to believe that the Oct qtr will be more difficult than previous qtr due to weak enterprise spending (especially in Japan and Europe), the difficult carrier market, and mixed messages from checks on CSCO's Oct qtr progress; believe their Oct qtr est of flat sequential sales is achievable, but the backend loaded nature of the qtr makes it too early to determine if CSCO will meet ests.
8:08AM Taiwan Semi estimates cut by Goldman Sachs (TSM) 6.88: Goldman Sachs trims 2002 est to $0.22 and 2003 to $0.32 (the latter well below consensus) due to more conservative avg selling price forecasts and lower utilization assumptions; however, firm believes the co is making big breakthroughs in its 0.13−micron process, with strong improvements for Via, BRCM, MOT, and possibly NVDA.
8:05AM Intel talking to Japanese chipmakers about DRAM production: Bloomberg (INTC) 15.20: Bloomberg reporting that the Economic Daily News out of Taiwan says today Intel has been in talks with Japanese chipmakers Mitsubishi and Elpida about making memory chips - the story doesn't cite any source for this speculation and an Intel spokesman would not comment. Separately, Korean chipmaker Hynix sold its flat panel division for $380 mln, which could provide liquidity to stay in the memory business longer. Both news items are being seen as negative for Micron (MU).
7:55AM Dell Computer quarter on track - Merrill Lynch (DELL) 24.88: Merrill Lynch says that checks indicate Q3 is tracking right on plan and firm remains comfortable with ests of $8.9 bln in sales and EPS of $0.21 (in line with consensus); although the mkt remains difficult, firm believes DELL is seeing relative stability in its end mkts; reiterates Buy rating and $35 price target
finance.yahoo.com^SOXX+ALTR+AMAT+AMD+ATMI+BRCM+BRKS+CSCO+DELL+FCS+GE+INTC+IRF+ISIL+KLAC+LLTC+LSCC+LSI+MOT+MU+MSFT+MXIM+NSM+NVDA+NVLS+RFMD+SLR+TER+TSM+TXN+XLNX+^IXIC+^VIX&d=t
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