Nasdaq…

[Riz]

Nasdaq failed to go for a four-day winning streak…down -55 (2.5%) to 2,168…

Investors rotated money into "old economy" stocks amid the uncertainty about the growth prospects for the tech stocks…

This of course did not come as a surprise as it was not widely believed that tech stocks would be able to sustain the three-day gains…

The lack of confidence in technology stocks made investors turning to safety and shy of tech stocks...

"Investors still have a lot of rebuilding of confidence before they jump back in with both feet," said Michael Carty, stock market strategist with New Millennium Advisors. "They're (investors) not in a rush to get in -- they've already tried all the buying on dips they intended to do and they want to make sure this is the last dip." (cnnfn)

"The market has been able to stomach a lot of bad news -- we've seen disasters every day and the market has trended higher," said Art Hogan, chief market analyst with Jefferies & Co. "This is day four, so it's only natural to want to take profits." (cnnfn)

It all comes down to the interest rate cuts and more importantly improved earnings outlook, and this is what investors would be looking for…as it is obvious improved earnings will take time, it is secured interest rate cuts clues which they’ll be looking for when reading tomorrow morning's jobs report…

As said in previous Nasdaq threads until this is cleared it’s going to be up and down bounces…oversold conditions and uncertainty about earnings outlooks is turning these bounces into a tug of war between buyers and sellers…well this week it seems to be evenly matched…

That’s why the next Fed meeting in 2 weeks is so much focused on…buyers want to get Greenspan fully on their side before completely committing to the tech stocks and while waiting for that they buy oversold, cheap tech stocks causing a bounce up, but as they are not convinced enough to commit themselves they soon sell them to take profit..

"It cannot be denied that Nasdaq's most recent crushing has left behind a considerable amount of upside room for a retracement rally to potentially take place. In fact, the Nasdaq could move up in the area of 2,500 and still be within the guidelines of the negative short-term trend," said Investec Ernst & Co.'s technical strategist Terry Danish he also added that this situation creates plenty of opportunities for those looking to capitalize on oversold bounces in individual stocks…

That’s how the bounce up occurs…then when they get in profit and more scary warnings such as yahoo’s come round they join the bears and cause the bounce down…

Let’s see which way the employment data that will be released tomorrow will put its weight in this tug of war…if it doesn’t give more clues of further interest rate cuts expect another bounce down…any more hope of further interest rate cuts will certainly make grounds for a bounce up after today’s tumbling…

No need to repeat again that no tech stock is worth to hold long-term until this uncertainty and confusion is cleared in favour of the sector…on the other hand bounces do provide good short term trade opportunities…

Riz

 

[titus-uk]

Nice one...

Excellent post as usual - makes it a must for me to visit this BB late each evening. You give a great balanced summary of the days trading.
Much appreciated
Mark

 

[Riz]

Cheers Mark,

I usually do research on the Nasdaq after the US closes and feel I should share the conculusions I come up to with other members as I know most of them don't have that much time to do it themselves, I think a humble summary of the days trading may be of help... glad you find it useful..

Hi Sharky,

Just realized that this is my 499th post...probably mostly chit-chat to you still what happens when you write the 500th post (probably kicked off the board for talking too much, eh?)

cheers

Riz

 

[y2k]

Naz - where next?

Appears to me that the bottom is near. The 2nd Yahoo profit warning in as many months has not caused a landslide. Intels after hours warning will strike a little today but it dosen't look to have the bite of Nortel. Would cut and run on chips though.

 

[Riz]

Nasdaq kept tumbling down…

It never rains but it pours..as the saying goes…not that a `high-profile` profit warning from Intel was enough to push the Nasdaq down a strong jobs report which should normally refer to stronger economic recovery blurred the interest rate outlooks and adding to Intel warning sent the already shattered Nasdaq much further down to its lowest levels in 27 months…

Just on the day before the one-year anniversary of the Nasdaq's all-time high of 5,132 peak…ironic, isn’t it? 60% difference between the two points and the Index has just a little distance to test the 2000 mark….

This is also the sixth consecutive Friday sending the Nasdaq down…

Employment report turned out to be stronger and created more uncertainty over how aggressive the Fed will need to be on the interest rate cuts…

"Without the prospect of aggressive Fed action, I don't see any catalyst to get the market moving again. Let's face it. Short term, the economy may look okay, but earnings look awful," commented John Forelli, senior vice president and portfolio manager at Independence Associates. (CBS)

The Nasdaq Composite plunged 115 (5.3%) to 2,052 with an intra-day low of 2,047… breaching the previous low of the year, set on March 1, by 24 points…

"Nasdaq at 2000 doesn't look solid to most investors. They're jumping on the floor to see if it will hold. I'm not sure it will. Intel's warning just shows that the expectations for tech companies, although coming down, have a ways to fall. Investors are still seeking a level where they will be comfortable accumulating shares of these companies," Forelli concluded.

Barry Hyman, chief investment strategist at Weatherly Securities was on the other hand hoping that the negativity stemming from Intel and confusion over the employment report could somehow define a psychological bottom in the market…

"We're getting doubly hit here," Hyman said, noting that Friday's strong data is adding to the market's anxiety by throwing in uncertainty over the magnitude of future rate cuts. (CBS)

Volume was 2 billion on the Nasdaq... with a negative market breadth of decliners outpacing advancers 27 to 10…

All tech groups slid, led by chip and hardware stocks… National Semiconductor -$1.93 to $23.32, Yahoo! -69 to $17, Microsoft - $2.56 to $56.69, Dell Computer -2.75 to $23.38, and Sun Microsystems -$2.88 to $17.44...

So now it is not only about growth forecasts that investors should be worried about…the expected interest rate cuts also are in question…

As observed by Joel Naroff, chief economist at Naroff Economic Advisors, a two-sided economy occurred in the US…collapsing manufacturing and strong construction and services…

And it looks like at the March 20 Fed meeting the members will have to decide whether manufacturing will pull down the rest of the economy or whether the rest of the economy will rescue manufacturing….

It’s this decision that will determine the aggressiveness of interest rate cuts I think…

And although there are analysts like Seth Martin, equities analyst with IDEAglobal.com. who thinks the last shreds of hope that there would be a 75 basis point cut has been quashed (CBS), I do not think the Fed will just stand aside and watch part of the economy collapse just because the jobs report came out to be stronger suggesting strong construction and services…but they will also not rush to the help of the tech stocks, as Greenspan himself once mentioned the over valuation of the technology stocks..

So at what point will they be fairly valued? That’s everyone’s guess, I personally do not think it’s much further down from today’s intra day low…we’ll probably see bounces up next week caused buy bargain and bottom hunters…no doubt they will be followed by bounces down for the reasons explained in the first post of this thread…

So still bounces down and up…only down ones more effective for the time being and still no tech stock is safe and still good trade opportunities for short/intraday traders but nothing safe for long/medium term holding investors…

Whatever you do, don’t get trapped and become long term holders of tech stocks for the time being….

Riz


[Edited by Riz on 10-03-2001 at 11:34 AM]

 

[Riz]

Today's ft lex coloumn suggests that the Nasdaq is probably close to, or at, its bottom...

"But, hard as it is, investors should try to retain a sense of perspective. The worst news on earnings is probably past - unless the US slides into a full-blown recession, which still looks unlikely. And whatever happens to profits in 2001, secular spending on technology will continue to grow faster than the economy, so long-term growth rates for most tech stocks still look pretty much intact. The difference is that they can now be bought at much more reasonable valuations. Cisco, Oracle and Sun Microsystems - with five-year growth rates of 25-30 per cent - are all trading on 2002 multiples in the mid-20s. At this level, the Nasdaq is probably close to, or at, its bottom. But its next ascent is likely to prove much more gradual."

Riz