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Mixed Signals

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The Nikkei falls another 1.5 percent overnight due to concerns over Japanese banks; however, S&P futures currently point to a slightly higher opening in the US. Across the pond, European indices rose after a stronger-than-expected purchasing-managers data; thus strengthening the Euro.

Greenback in Red

The US Dollar experienced heavy volume overnight, falling to 0.99 against the Euro before slightly recovering as equity futures began to find life. Currently at 105.77, the short-term objective for the Greenback is for a move lower to 104.64. This should pressure indices from Oil to Utilities, including pressure on both the Dow and Nasdaq. It would take a rise back above 107 before sentiment will shift to more neutral levels and talk of repatriation begins to take form. Currency traders most likely will wait until the Q2 Productivity figures (Thursday) and non-farm payroll report (Friday) for guidance.

Infrastructure an Oxymoron?

Salomon Smith Barney initiated coverage on the enterprise infrastructure software group with an underweight weighting based on near-term concerns surrounding weakening fundamentals. The company began coverage on CA with a target of $13, MERQ ($28), ORCL ($12), and VRTS with a price projection of $17.

Intel and Semiconductor Sector

With Merrill Lynch cutting earnings estimates on Intel (INTC), traders are certainly concerned that both INTC and the overall Semiconductor Sector (SOX) will see new 52-week lows in the near term. Shares of Intel closed at 15.86, while its 52-week low is The Semiconductor Index closed at 284.94, while its 52-week low is just underneath at 282.75. Merrill expects Intel to report 2002 earnings of 51 cents, compared with previous expectations of 55 cents. For 2003, Merrill has lowered their estimates from 86 cents to 76 cents.

Looking at a P&F chart of INTC, the break down from 30 to 17 certainly allows us to forecast a bearish price objective. Since the scale goes from 2 dollar increments to 1, we will have to do two different calculations. The first, from 30 to 19.5, gives us 11 O's, which we multiply by a factor of "1" and then by "2" for the scale size. This gives us (11 times 1 times 2) 22. Then, from 19.5 to 17, we take the 5 O's and multiply it by a factor of "1" and then by a scale of "1". This gives us (5 times 1 times 1) 5. We then add 22 to 5, which is 27, and then subtract that number from 30. As you can see, we get a bearish price objective of 3 for Intel. Not too encouraging. This seems extremely overly optimistic for bearish traders; nevertheless, a trade underneath 15 could be the catalyst for a move into single digits. It most likely will take a move above 20 before sentiment turns to more neutral levels.

Stock Futures

On Globex, S&P futures are currently 2.30 points higher at 880, while the Nasdaq 100 futures appear unchanged. The September Dow contract is higher by 34 points.

John Seckinger
Option Investor


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