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Index Wrap

So Much For "V-Bottom" Chips

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        08-06-2001        High      Low     Volume Advance/Decline
DJIA    10401.30 -111.50 10504.10 10374.90  817 mln   1200/1869	
NASDAQ   2034.20 - 32.10  2053.60  2032.51 1.08 bln   1393/2286
S&P 100   615.21 -  8.44   623.65   613.16   totals   2593/4155
S&P 500  1200.48 - 13.87  1214.35  1197.35           
RUS 2000  480.96 -  6.19   487.14   480.95
DJ TRANS 2908.27 -  5.75  2934.27  2905.50
VIX        23.74 +  1.35    24.20    22.85
Put/Call Ratio      0.56

So Much For "V-Bottom" Chips
Austin Passamonte

Philadelphia Semi-Conductor Index (SOX.X): gold chips or cow chips? Analysts cannot seem to decide which flavor it is. Then again, no sensible traders I know of care less any more what most of those Wall Street buffoons offer as guidance. Do they?

Well, I have utmost respect for Dan Niles who has always and continues to call 'em like he sees 'em and hasn't missed a turn in quite some time. I must be in a minority because last month when INTC "beat the street" (what a sham that whole scene is) he stated their prices would trade much lower in the months directly ahead. No worries; momentum bulls happily ramped this baby up when left-handed upgrades were offered for non-congruous chip makers last week. After a weekend dose of soul searching and reality checks, happy bulls couldn't wait to wipe those very same chips off their hooves today.

Seventy Five Years To Break Even?
All irreverent hope now turns to mighty CSCO and its 75-times forward earnings valuation to save technology. I assume it'll do better, but if CSCO grew at a flat pace from here it would take three-quarters of the entire 21st century earnings to justify today's stock price. What type of exponential growth must Chamber's baby deliver in order to make $20 a value today, let alone double that?

Oh I remember, PE ratios on sexy techs don't matter because they will grow so fast those big pants they swim in will soon fit fine. Hmmm... I'll pass on going long CSCO right here myself and wait for those size 75 jeans to become a size 30 or thereabouts instead. Never happen? Only a matter of time. Either CSCO grows into its value or the stock comes down to meet reality, one of the two.

But I don't worry myself with upgrades, downgrades, news briefs, press releases and all temporary market effects. I just try my best to interpret the herd's next move and for that we measure their intent via the charts.

(Daily/Hourly Charts: Dow)

And the charts are telling us it doesn't look so bullish right now. Daily-chart stochastic values turned decidedly bearish on all major indexes and sectors Friday morning and doesn't seem quite finished yet. I'm watching daily-chart lines of support for the next possible bounce but will not play the upside unless/until those stochastic values turn bullish again.

(Daily/Hourly Charts: QQQ)

The NDX/QQQ is basing according to some and that's a good thing long term, but might be long term before it moves either way. A solid run on the SOX last week managed to drag the QQQs up four measly points over nine sessions before breaking down from there. Dead index for now and likely to revisit last month's lows real soon.

(Daily/Hourly Charts: SPX)

The SPX broke down today and the close on 1200 means very little tonight. Resistance/support has been fought near the 1202-1204 range lately and lies overhead from here. Look for a visit near 1190 and low 1180s on further weakness tomorrow.

Cut Short
Yet another violent summer storm has knocked out cable access and Qcharts service for tonight. Glad I did my charting before the wind, hail, lightening and torrential rains moved in. Colorado is a beautiful state but I've endured more extreme weather in half of one summer than 36 years in western New York combined.

So we didn't get all the charts loaded I wanted to, but more of the same is probably just that. Markets have gone from bullish to mixed to bearish and the transition may not be complete. Happy words from CSCO tomorrow night or anything twisted to suit more buying will cause precisely that. Buyers are just dying to jump on all their fallen angels before the annual Labor Day rally begins. Any excuse will do, if only those nasty bears would just go away.

I'll close with the same thought from this weekend past: these are markets much easier to lose money than make money in and direction can turn on a dime. Don't fall in love with puts or calls right now and enter at your capital's own peril. We will do our very best to gauge market action, but this remains a nimble, individual market veteran's game. Please be careful out there: the fortune you save may very well be your own!

Best Trading Wishes,

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