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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank -- Ignore unavailable to you. Want to Upgrade?

To: Jenna who wrote (43253)	6/5/1999 10:41:00 AM
From: Lane Hall-Witt	Read Replies (2) \| Respond to of 120523

I think the Nets are entering their "transition" period now and that being short the blue chips would be dangerous. There were a handful of signs. First, we've now officially entered earnings warning season. Hooray for QNTM! Earnings warnings aren't much fun, obviously, but they offer up a new story and dilute the focus on the Fed. Over the next couple of weeks, we'll start to see CNBC interviews with the First Call folks: "There are far fewer companies pre-announcing this quarter . . . earnings show strong growth over last year." All of a sudden, we'll be reminded that economic growth is a good thing, too. The analysts will turn their attention to earnings and will start to say: "Oh, sure, the Fed is going to raise rates by 25 basis points at June's FOMC. We knew that all along and factored it into the market way back in May. The important thing is to ask whether there'll be a trend of Fed tightening, and we don't think that's the case. This is a good pre-emptive strike against inflation, but it shouldn't put too much pressure on the global economy, which still needs to return to growth." The second thing is: did you see the volume for AOL during the last half-hour of the trading day? Something like 10 million shares on a sunny summer Friday afternoon. To me, that confirms the theory that there's a boatload of money waiting on the sidelines, earmarked for the Nets when a bottom is formed. Even CNBC picked up on this theme right away -- instead of waiting to report it posthumously, when AOL hits 150 in a few weeks. Third, there are some immense short positions in the Net stocks, and I believe the short covering began yesterday. The tip-off stock for me on this is UBID. Last month, UBID had 1.3 million shares short (the float is 1.6 million). The shorts absolutely ruled that stock until yesterday, when it gained 23 percent despite the fact that MALL will spin off the remaining shares next Monday, thus adding another 7.5 million shares to the float. What a huge win for the shorts if they had held together through next week! But they caved--. If shorts had to scramble to cover UBID, you can imagine what the 55.2 million shorts in AOL, the 11.7 million shorts in YHOO, the 4 million shorts in EBAY, the 11.3 million shorts in AMZN, etc., must be thinking. Don't get me wrong. I don't think we're going parabolic from here. The action will certainly be volatile, especially with inflation numbers coming out soon and with the ongoing concern about the Fed. However, I think we're getting some tangible signs that a rebound is coming, and I want to be ready for it.