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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: TI2, TechInvestorToo who wrote (10138)	6/16/2003 10:36:41 AM
From: Return to Sender	Read Replies (1) \| Respond to of 95530

WEEKLY OUTLOOK, June 16 By Jody Osborne, Optionetics.com 6/16/2003 7:00:00 AM optionetics.com Expiration week is upon us, with the major market indices starting to show some weakness. The Dow ($INDU) continued its ascent, tacking on 0.60 percent last week, but the S&P 500 ($SPX) and Nasdaq ($COMPQ) both fell slightly into the red. Though stocks aren’t falling, the bulls are finding it tougher and tougher to push equities higher. Economic news continues to be a major focus and though these reports are showing some signs of improvement, the overall feeling is that the economy is not growing as quickly as hoped. Since stocks have gained a lot of ground in the last three to four months on hopes of a recovery, sub par economic news could lead to selling in the near-term. Adding to the concern is the fact we are entering earnings warning season and this normally isn’t a good time for stocks. Last Friday, the University of Michigan Consumer Sentiment Survey came out worse than expected, spurring a sell-off in stocks. The Producer Price Index [PPI] also came out worse than expected, dropping 0.3 percent, once again bringing up talk of deflation. This week, there will be plenty of economic news to digest, with the following reports on tap: Monday: NAHB Housing Market Index Tuesday: SEMI Book-to-Bill Ratio, Chain Store Sales Snapshot, New Residential Construction, Consumer Price Index, Industrial Production Wednesday: ABC News/Money Magazine Consumer Comfort Index, Monthly Mass Layoffs Thursday: Jobless Claims, Current Account, The Conference Board Leading Indicators, Philly Fed Survey, Treasury Budget Friday: None Of course, the CPI on Tuesday could have an impact on trading, given the weak report we got from the PPI. Also in focus will be any news dealing with the employment situation. The ABC News sentiment survey might also get more play, given the drop in sentiment in the University of Michigan report last week. As usual, it is results that stray from expectations that have the greatest influence on stock prices. This is the last full week of economic news before the FOMC meets next week on the 24th and 25th. A 25-basis point cut has been priced into the market, though the odds of a 50-basis point cut have been rising. Through last Friday, Fed fund futures were pricing in a 62 percent chance of a 50-basis point cut. Fed Chairman Greenspan has stated that he sees little risk in trying to curtail deflationary pressures by lowering rates. Earnings news always has an affect on trading, though there aren’t a whole lot of major corporations set to report. Nonetheless, below is a list of the companies on tap to release earnings this week: Monday: Apogee Enterprises (APOG), Enzo Biochem (ENZ), SkillSoft Corp (SKIL), Standard Microsystems (SMSC) Tuesday: Circuit City (CC), Navistie (NAVI), Pier 1 Imports (PIR), Progress Software (PRGS), Red Hat Inc (RHAT), Vivendi Universal (V) Wednesday: Bear Stearns (BSC), Bed, Bath & Beyond (BBBY), Best Buy Co (BBY), Intraware (ITRA), Jabil Circuit (JBL), Morgan Stanley (MWD) Thursday: Darden Restaurants (DRI), GTECH Holdings (GTK), Infonet Services (IN), KB Home (KBH), Lehman Brothers (LEH), Saba Software (SABA), Solectron (SLR), Tibco Software (TIBX) Friday: Isle of Capris Casinos (ISLE) The bears haven’t been able to gain control of the market yet, but they are poised to do so. The bears quickly point out that recent strength has died and that it is going to be tough for the bulls to keep pushing stocks higher. The Philly Semiconductor Index ($SOX) feel nearly 7 percent this past week and has been underperforming the broader market of late. This is bearish news because the chip sector often leads the market higher and lower. Another point the bears will make is that the SPX has found it difficult to break and hold the 1,000 area. Often, resistance levels will give traders an excuse to take profits. On the flip side, the bulls will point out that economic news is improving, even if it isn’t doing so at a rapid pace. The bulls also will state that even bad news has not been able to take stocks lower, showing that there aren’t a lot of traders willing to sell. Another bullish fact is that the fear indices are not falling sharply on the advances. A few weeks ago, the CBOE Market Volatility Index ($VIX) nearly hit the key 20-level; however, the VIX has stayed safely above this market since then. In fact, on many occasions the VIX has risen even as stocks have gained ground. History tells us that in order for stocks to continue rising, there needs to be a degree of fear and so far there has been. Overall, I think it will be tough for stocks to move substantially higher in the near term. However, it is hard to say the bears are going to move stocks sharply lower either. This could lead to some volatile, though sideways trading. Fortunately, as option traders, we can profit from a neutral market using various strategies. It is option expiration week, so if you have strategies that need adjustments, make sure do so before Friday’s close. Jody Osborne Senior Staff Writer & Options Strategist Optionetics.com ~ Your Options Education Site Visit Jody's Forum