From Briefing.com: Updated: 24-Dec-02 - General Commentary - All in all, traders continue to contend with more of the same. Consistent with the recent pattern, Monday's trade activity once again occurred on notably light volume -- the Nasdaq didn't make 1.2 billion total shares traded. So perhaps the most notable developments occurred in the commodity markets. Note that front month crude oil settled at $31.75 per barrel, up $1.45 versus Friday's close. At the same time, front month gold closed at $345.60 per oz., up $4.60 on the day. Now these aren't exactly the most bullish developments, yet with the aforementioned thin trading conditions, it's difficult to make too much of them.
Looking ahead, we have the holiday week before us. Yet as a practical matter, this means there isn't much to look towards at all. The earnings calendar is literally empty, and the economic calendar is relatively light as well. With that as the backdrop, the technical outlook becomes somewhat more influential.
Now before we get to the straight technical levels, it probably makes sense to revisit our more recent technical take on the Nasdaq. Note that we shifted to a near-term bearish bias back on Tuesday, December 3rd following the Nasdaq's December 2nd peak at 1,521. Then on Monday, December 9th we took a more neutral tone, leaning in favor of a 'choppy' intermediate-term outlook. That neutral view was reiterated the following week on Monday, December 16th.
So the good news is that the actual market performance has matched up reasonably well with those broad expectations. Yet at the same time, the bad news is that the markets continue to be in something of a rut going into these more thinly traded sessions around the holidays.
Now Monday's activity wasn't entirely uneventful as the Nasdaq actually cleared both its 50-day simple moving average and its 20-week exponential moving average -- this despite the thin volume. So the very near-term bias has once again improved modestly, but traders will continue to key off many of the same landmarks.
On a near to intermediate-term basis, the immediate bias will improve or deteriorate based on the Nasdaq's relationship to the following key levels: 1) the 1360 level which represents straight-line support going back to October, 2) the 1373 to 1377 range which brackets the index' 50-day simple moving average as well as its 20-week exponential moving average, and 3) the 1390 level which currently represents the Nasdaq's 20-day exponential moving average and also matches up with prior congestion. Other points of interest appear as shown in the chart above. Mike Ashbaugh
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4:34PM Sanmina-SCI raises $1.025 bln in financing (SANM) 4.30 : Announces that it has closed $1.025 billion in financing pursuant to an offering of $750 million of its senior secured notes in a private placement to qualified investors and a $275 million senior secured credit facility.
4:13PM Sun Microsystems rises on preliminary decision (SUNW) 2.96 -0.05: -- Update -- SUNW +0.41 vs the 4 pm ET close to 3.37
4:11PM Sun Microsystems wins key ruling over Microsoft (SUNW) 2.96 -0.05: Pending further resolution, Microsoft must carry Sun's Java in Windows.
3:25PM Nasdaq continues to hold 50-day simple moving avg : -- Technical -- Going into the final hour of trading, index continues to hold its 50-day simple moving avg at 1373. To the upside, look for subsequent resistance at 1380 which marks straight-line resistance. After that, the Nasdaq's 20-day ema rests at 1390. To the downside, watch for initial support now at 1373 followed by additional support at 1367.
2:23PM The Big Picture - Fewer Warnings: In response to a reader request (and our own suspicions), Briefing.com took a look at whether or not there have been fewer earnings warnings this quarter than in previous quarters. It sure seems that way. And in fact, there have been fewer warnings. This augurs well for a January earnings-season rally.
So far in December, there have been 75 earnings warnings according to our database. Last December (through December 23) there had been 195 warnings. In November of this year, there were 77 warnings compared to 67 last November. Overall for the fourth quarter, warnings may come in down about 35% compared to last year. Of course, the fourth quarter last year was affected by the September 11 terrorist attacks, so that number may have been inflated. But even even compared to the third quarter, it looks like there will be about 15% fewer warnings this quarter.
Of course, it isn't just the number of warnings that is important. Which companies, and the magnitude of warnings also makes a difference. But that also seems to have improved in the fourth quarter. McDonald's has sure had a bad quarter, but there have been few big warnings from other Dow companies or major technology firms. The big names haven't caused much of a stir yet.
It is possible that the lower number or warnings simply reflects greater caution on the part of companies in presenting expectations. That is, maybe expectations were set low for the fourth quarter, so there are fewer warnings. That would still be good news, though.
The fact that there are fewer warnings so far in December explains in part why the Dow has been able to hover around 8500 and not be hit by the common end-of-quarter blues. Often, warnings in the final weeks of a calendar quarter will slam the market. The market was down in March, June, and September this year (and plenty of other months as well). That hasn't happened this quarter. To be fair, it must be noted that December was a flat month last year ahead of a down January. The market did rally in February and March, however.
This was not intended to be a fully researched analysis of warnings and market behavior. However, it is our belief that the fewer number of warnings this quarter suggests that expectations may be well set for a minor January rally. As earnings come out, and concerns fade about a company missing estimates, stocks often do better. Every quarter, about 65% of companies report earnings above estimates, 15% miss, and the rest are in line. Every quarter. So this January, as earnings come out, the tone may be set for a minor rally in the stock market. -- Dick Green, Briefing.com
11:02AM Sector Watch: Semiconductor : Sector index (SOX at 307) posts solid advance on the back of strength in ALTR +5.3%, NVLS +5%, AMAT +4.7%, KLAC +4.3%, TER +4%, MXIM +3.4%, BRCM +3.3%. Currently vacillating near resistance at 307 (mid-month range floor) with a secondary ceiling in the 311/312 area (chart/50 day sma). Short term support is at 305/304.50.
10:52AM S&P 500 intraday levels : -- Technical -- Index modestly higher and testing converging moving averages in the 900/902 area (50 day ema/sma, 20 day ema). Next resistance is at 904 in front of the 910/911 area (two week highs). Short term support is at 897/896 followed by 892.
8:03AM CoorsTek agrees to be acquired for $26 per share cash (CRTK) 23.20:
12:07PM The Big Picture - Economic View: Fourth quarter Gross Domestic Product will come in at an increase of around a 1.5% annual rate. That is by no means great. It also isn't a recession. From a broader perspective, it has to be viewed against the 4.0% gain posted in the third quarter. That still leaves the trend at 2.5% to 3% annual growth, which is what Briefing.com expects through 2003.
This steady economic growth sure doesn't feel that good. That is because this remains a very sluggish recovery from recession. Traditionally, the economy surges out of recession with good strong 4% to 6% growth to make up for the previous weakness. This time it is different.
The difference in this recovery is that the recession was the offset to the previous above-trend economic growth. The boom years of 1998-2000 lead to massive overcapacity in many sectors. This obviously occurred in technologies such as fiber optics and semiconductors, but it also occurred in auto production, airline capacity, business offices, and many commodity sectors. The boom in production led to a "virtuous circle" that also was reflected in profits, employment, and the stock market. Of course, that boom also eventually led to a bust.
The bust was most evident in the stock market, but the overcapacity built up in the boom years also contributed to an economic recession. The recession was the hang-over from the boom. This is different from a recession caused by a spike in interest rates or an exogenous factor. In that case, on-trend growth gets knocked down. When the recovery comes, it is catch-up time, and the economy booms. This time, the recession was needed just to get back down to the long-term growth trend.
So now the recovery is simply a return to modest growth at best. In fact, excess capacity continues to plague the economy. Consumer spending keeps right on growing at about a 3% real annual rate, but business investment remains weak. This will continue into 2003 and perhaps beyond. That means that the economy will continue to grow, but not in the typical explosive recovery form, and even below long-term trend while business investment remains weak. The hang-over will take more than a few quarters to cure.
The feeling that this is a weak recovery, however, should not create confusion that it is still a recession. It isn't. The economy is growing. It will continue to grow in 2003. This growth will produce higher profits next year as business retain tight control on spending. Profits won't boom any more than the economy, but the growth will provide an underpinning for decent stock gains next year. -- Dick Green, Briefing.com
10:24AM Technical Levels : So the markets finished last week on a somewhat positive note. By the end of Friday's session, the Nasdaq closed with a respectable nine-point gain on modestly bullish market internals. Total volume traded did indeed strengthen on the quadruple witch, approaching 1.7 billion total shares, while advancing volume outpaced declining volume by about 2 to 1.
Now coming into this holiday shortened week, it probably makes sense to revisit the more recent outlook in this column.. Note that we shifted to a near-term bearish bias back on Tuesday, December 3rd following the Nasdaq's December 2nd peak at 1,521. Then on Monday, December 9th we took a more neutral tone, leaning in favor of a 'choppy' intermediate-term outlook. That neutral view was reiterated the following week on Monday, December 16th. So once again the good news is that the actual market performance has matched up reasonably well with those broad expectations. Yet at the same time, the bad news is that the markets continue to be in something of a rut going into the more thinly traded sessions around the holidays.
Those that have been following along know that Friday, December 20th marked the first ever quadruple witching session. As a consequence, we were looking for an increase in volume to contribute towards clarifying the very near-term technical outlook. Now as we already mentioned, volume did indeed pick up and the index finished with a respectable nine-point gain. Yet at the same time, the Nasdaq's price action left something to be desired. On an intraday basis, the index came up to test its 50-day simple moving average, at 1370, and that 1370 level turned out to be the intraday high. By the end of the session, the index closed in the lower half of its intraday range.
Now keep in mind we're splitting hairs to some extent, in part because the indices have really flattened at this point. Market bulls will note that on a relative basis, the Dow looked somewhat more healthy with its close at 8511, just one point below its 50-day simple moving average at 8512. It's also somewhat interesting that the Dow finished very close to its best levels of the session on the quadruple witch. So from a strictly technical perspective, the markets continue to send these mixed signals.
Looking outside the intraday activity and towards the daily price action, note that today's chart appears somewhat more cluttered than it typically might. Now as a rule we make efforts to avoid this clutter, but today the clutter is there to further this story of market consolidation. Without making things overly complicated, note that the Nasdaq's major moving averages have now bunched up so that they each fall within a 141-point range.
While 141 points may sound reasonably wide, keep in mind that as recently as September 5th, the Nasdaq's 50 and 200-day simple moving averages were separated by roughly 350 points. Going back to the Spring of 2001, those same moving averages were commonly separated by as much as 800 to 950 points. Today, if you were to take just the 50 and 200-day simple moving averages in particular, they would bracket a much more narrow 95 point range.
Getting straight to the technical levels today, note the technical picture hasn't changed substantially with Friday's nine-point gain. The immediate bias probably favors the upside at this point, yet the chances of accomplishing much on these thinly traded holiday sessions isn't great. Once again, the very near-term bias will improve or deteriorate based on the Nasdaq's relationship to the following key levels: 1) the 1350 level which matches up with a prior pivot point and approximates the low for the recent consolidation phase, 2) the 1373 to 1377 range which brackets the index' 50-day simple moving average as well as its 20-week exponential moving average, and 3) the 1390 level which currently represents the Nasdaq's 20-day exponential moving average and also matches up with prior congestion. Other points of interest appear as shown in the chart above. -- Mike Ashbaugh, Briefing.com
Cypress Semi (CY) 5.60 +0.30: Guided dowwn for Q4, says revenue will be approximately $174 mln, plus or minus $1 mln, 7% lower than the current analysts consensus estimate of $187 mln -- Multex consensus estimate is for revs of $186.7 mln. Says company's bookings and turns run-rates, which were tracking close to the analysts estimates through the end of November, slowed significantly since the first week of December and are not expected to rebound during the holidays. Most of the revenue short fall is expected from the company's wireless segment.
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