From Briefing.com: In our last update, we wrote that the tech sector rally on Thursday wasn't a very convincing reversal given the moderate volume on which it occurred. In early trading on Friday, the tech sector looked like it had something to prove as it started the session on an upbeat note and drove the Nasdaq to a 19-point gain by mid-morning... and then, the weekend beckoned.
Slowly, but surely, positions were reversed and the gain was wiped out by the closing bell. In fact, the Nasdaq ended the day with a loss of nearly 9 points. Nothing substantive mind you, but nonetheless, it marked the sixth loss in the past seven sessions. The retreat coincided with a slide in the influential semiconductor and biotech groups, which spearheaded the early advance, but for the most part, it was broad-based in scope.
The downturn occurred on moderate volume (1.22 bln shares at the NYSE and 1.56 bln shares at the Nasdaq) so, to be fair, we'll refrain from characterizing Friday's trade as being a convincing move. The action for the week overall, though, re-affirmed our belief that short-term sentiment toward the stock market is mixed at best. We still feel stocks are the best, long-term investment alternative, but for the time being, we are more concerned about the possibility of a near-term sell-off than missing a big rally and believe a cautious approach to the tech sector, and the stock market, is still the best approach.-- Patrick J. O'Hare, Briefing.com
5:06PM Weekly Wrap :
The market started the week on a downward note and it spent the rest of the week trying to play catch up, only it never caught up. Standing in its way on the road to recovery was the June FOMC meeting, which was a two-day affair that culminated in an announcement on Wednesday afternoon that the FOMC elected to cut both the fed funds rate and discount rate by 25 basis points to 1.00% and 2.00%, respectively. It was the accompanying risk assessment, though, that was the real focal point for the Treasury and stock markets.
In the risk assessment, it was acknowledged that the probability of an unwelcome substantial fall in inflation, though minor, exceeds that of a pickup in inflation from its already low level and should predominate for the foreseeable future. By the same token, the FOMC also said that "...recent signs point to a firming in spending, markedly improved financial conditions, and labor and product markets that are stabilizing. The economy, nonetheless, has yet to exhibit sustainable growth. With inflationary expectations subdued, the Committee judged that a slightly more expansive monetary policy would add further support for an economy which it expects to improve over time."
In brief, there was a little bit of something for everyone in the FOMC announcement, as some pundits suggested it signalled the end to the easing cycle while others suggested it left the door open for another rate cut. If judging by the Treasury market's response, one would be left to conclude that the easing cycle has reached an end. To wit, the yield on the 10-yr note stood at roughly 3.27% just before the decision was announced on Wednesday. By the end of the week, the yield had backed up to 3.54%.
The stock market's reaction wasn't as clear cut as it sold off in the wake of the announcement on Wednesday, rallied on Thursday, and rolled over on Friday after beginning the day on a positive note. In fact, Friday's decline left the Dow below 9,000. We wouldn't read too much into Friday's fade, though, as it occurred on light volume, which is a hallmark of a summer Friday, especially one where there is sunny weather on the East Coast that has New York-based participants anxious to get to the Hamptons.
Overall, the action this week re-affirmed our belief that short-term sentiment toward the stock market is mixed at best. We still feel stocks are the best, long-term investment alternative, but for the time being, we are more concerned about the possibility of a near-term sell-off than missing a big rally and believe a cautious approach to the stock market is still the best approach.
For the week, influential leadership groups, such as financial, biotech, semiconductor, homebuilding, and drug, were among the notable laggards. That consideration, along with the weakening market internals and the high level of bullish sentiment as measured by the Investors Intelligence numbers, has contributed to our reserved near-term outlook.
Next week brings an abbreviated week of trading with the markets closed on Friday for the July 4th holiday. For added perspective on the holiday-shortened week, which is highlighted by the June employment report on Thursday, be sure to read Briefing.com's "Looking Ahead" Story Stock.-- Patrick J. O'Hare, Briefing.com
YTD chart of major stock indexes
Index Started Week Ended Week Change % Change YTD
DJIA 9200.75 8989.05 -211.70 -2.3 % 7.8 %
Nasdaq 1645.03 1625.28 -19.75 -1.2 % 21.7 %
S&P 500 995.73 976.22 -19.51 -2.0 % 11.1 %
Russell 2000 449.57 448.75 -0.82 -0.2 % 17.1 %
1:44PM Sector Watch: Semiconductor : Selling turns more aggressive in recent action with AMD -3.5%, BRCM -3.9%, NSM -2.2%, XLNX 2.7% and LLTC -2.6% pacing the way. Bucking the weaker bias are AMAT +1.1%, TER +0.2%, INTC +0.2% and TXN +0.2%. From a chart perspective relatively lackluster bounce for the index (SOX 358 -1.5%) off the 50 day average (also 38% retrace) and the failure at the 20 day ema raise the possibility of a retest/penetration of the June low.
1:09PM Sector Briefing - Semiconductor: : The semiconductor sector continues to exhibit solid price momentum going into the typically slower months of summer. Its momentum continues to find steam in light of 3D graphics chipmaker ATI Technologies (ATYT) handily beating consensus estimates on both the top- and bottom-line this week, which drove the stock up 17% in one day. ATYT also reported strengths in all product areas with notables being high-end desktop, discrete mobile, mobile integrated and add-in boards.
Despite the postive news surrounding ATYT's financial results, Advanced Micro Devices (00C) provided an interesting tidbit of information on Tuesday in the form of a pre-announcement declaring a 15% miss in its previous revenue projections due to SARS. The semiconductor companies who are also part of the "I need to cut my Q2 because of SARS" club consist of TXN, MOT and TQNT. Despite the announcement by the number two microprocessor company, AMD is back in its pre-pre-announcement trading range. The point here is that momentum continues to rear its ugly head as investors looked to a sagacious Bear Stearns analyst who upgraded AMD on Wednesday as an impetus to disregard the significant miss in projected revenues.
The Philadelphia Semiconductor Index has risen 26.97% year to date, which is closer to the NASDAQ Composite's increase of 22.4% and much further from the S&P 500's appreciation of 12.05%. It is this momentum that will keep the salient semiconductor stocks of the group rising into earnings season coming up in July, but what comes after that? A visit to Briefing.com's Stock Brief page will provide the answer.-- John Meza, Briefing.com
12:26PM Technical Levels : For the better part of a week now, we've been looking towards this longer-term technical level at 1619. Yet frequent readers know this 1619 area carries significance looking back beyond just this past week. In fact, this is a level that was originally identified as an intermediate-term target more than two months ago, in the April 23rd review -- at that time, the Nasdaq was holding in the vicinity of 1450.
Recall in the review Wednesday, we addressed the significance of 1619 in conjunction with this broader support point at 1598. Again, the relevant passage from the Wednesday review follows: "Frequent readers may recall that as far back as June 3rd we had staked out this same general area (technically 1591 to 1595) as the first 'real' area of interest. So today's follow through off yesterday's low at 1598 is an interesting near-term development at the very least. As we suggested (Tuesday), the near-term bias does improve assuming the index closes above that resistance at 1619."
So those parameters set the stage for the review yesterday in which the relevant passage follows: "Looking at the broader outlook on the daily chart, the current outlook shouldn't be a surprise. Note the Nasdaq's 20-day exponential moving average currently rests at 1615. This means the favorable bias early today has the Nasdaq situated above its 20-period exponential moving averages on each of the significant time frames. Also note the index has once again placed modest distance on that straight-line resistance around 1619."
So while the near-term parameters regarding the bias have been straight forward, the Nasdaq's intraday price action was also relatively interesting yesterday. The chart above is an intraday chart of Thursday's trade activity in which each bar on the chart represents the opening and closing levels for each five-minute time frame.
Without making things complicated, you can see several of our levels from the review yesterday weren't too far from the mark. Note each of the levels drawn in matches well with areas identified here this past week.
Yet also note the index' relationship to its 20-period exponential moving average (ema) on this five-minute time frame. You can see the Nasdaq closely observed that trendline for the better part of Thursday's session, while at the same time, maintaining a posture above it. On a very near-term basis, this is bullish price action, and the subsequent lift early today is consistent with what you would conventionally expect. -- Mike Ashbaugh, Briefing.com
10:13AM Intersil cut to Mkt Perform at Morgan Keegan on valuation (ISIL) 26.30 -0.92: -- Update --
7:51AM Microsoft earnings preview : CSFB expects Microsoft (MSFT) to report in-line results when numbers are released July 17. Although firm believes that stock's recent underperformance and attractive valuation leave room for it to "catch up" (particularly in the 2nd-half), thinks that in the medium term MSFT will continue to underperform. Firm continues to rate stock a Neutral with a DCF-based target of $29 (up from $27).
finance.yahoo.com^SOXX+ALTR+AMAT+AMD+BRCM+INTC+ISIL+KLAC+LLTC+LSI+MOT+MSFT+MU+MXIM+NSM+NVLS+STM+TER+TSM+TXN+XLNX+^IXIC+^NDX+^SPX+^VIX+^VXN+^STI.N+^STI.O+SMH&d=t
Michael, it looks like the shorter term moving averages are holding down the SOX while the 50 day moving averages are attempting to hold it up.
I'm thinking 333 for the SOX but with two new components who really knows?
RtS |
