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Computer Junk

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Stocks are putting in a good performance today on the strength of technology. The Dow is up 209 points, and the Nasdaq is higher by 58. Semiconductors are now up 5.32%, networking and software is up over 4%, and Internets are up 3.22%. Even computer stocks have been able to shake off their earlier weakness.

On Wednesday Gateway's corporate credit was lowered to junk status by Standard and Poor, and today the Wall Street Journal is reporting that year over year computer sales are likely to be lower for the first time in 15 years. Research firm NPD Intelect Inc. is reporting that back-to-school PC purchases, a precursor of Christmas sales, are lagging. Year to date, PC sales are off 21% compared to last year.

While computers have become faster and more stylish, my trusty four year old Pentium II seems to work just fine. Companies are taking the same approach, now waiting four years to update their computers instead of three. That puts computer makers dangerously close to becoming a mature industry like autos, televisions, and home appliances.

Dell Daily Chart

Regardless, Dell has been able to rebound from being down early, and is now up 82 cents. That puts the stock back above support at $22, but this year's up trend has already been broken. Dell might be able to get a bounce into the $24 area, or perhaps even $26, but the downtrend is still in control of Dell's longer-term outlook.

Apple Daily chart

Apple is also trying to climb back above support at $18, but is only up 15 cents today. With its up trend broken, Apple might have a hard time climbing any higher than $20. That's assuming the stock can even manage to close above $18. A drop to $16 looks just as likely.

Compaq Daily Chart

Compaq makes it a trio. Yesterday the stock dipped below support at $13.20, but is back above it today. While the 2.30% gain is nice, Compaq looks to have the shortest of any perspective bounces. With a big downtrend looming overhead, Compaq maybe has $1 of upside.

Jeffrey Canavan
Assistant Analyst
www.premierinvestor.net

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