To The Point That CNBC Is Turning Interesting
You probably know what I am talking about, as it's the point where CNBC becomes more interesting than watching your trades. What is it going to take to kick the Nasdaq out of the current range? I guess I shouldn't be so picky as there are still plenty of stocks making big moves. This is an individual stock pickers market and it is hard to complain about that. But, if the Nasdaq could kick start itself over 3900, everything would be a potential call play. Or a breakdown under 3700 to bring the Bears to life. Until then, we are forced to wait for signs of direction.
Today's market gave us little in the way of clues to figure out which way the tide will turn, but it did produce a decent rally. Let's start with the Nasdaq. A slump on the open down to 3763 turned into steady climb from 11am EST up until 2pm when the Nasdaq topped out once again at 3850. Back down into boredom we go, right? Fortunately no. A final 30 minute rally blossomed and took us back right near the day high, closing at 3845.74, up 48.33. This rally wasn't subtle either. Many stocks took off with a vengeance to close right at or near their highs. Volume wasn't too shabby either at 1.4 billion. A close like this one, as you know by now, typically spills over to the next morning. So once again, I have to point out what I mentioned on Tuesday. We are at a level where we could blow through 3900. It didn't pan out Tuesday, but we never really sold off either. Check out what the Nasdaq has done since Tuesday's close.
Here is the longer term view of this range we have been caught in for over two weeks. Is this chart we are looking at one of a major market index or of an irregular heart beat? It makes it a little tougher to spot a trend. I won't even attempt to draw on this one. You get the picture...3900 top, 3700 bottom.
And how about the DJIA? It rallied right out of the gates this morning and spent nearly the entire day over the unchanged line. Volume was solid at 1 billion shares. The Dow Industrials finished at 10714, up 26.87. This was despite a weak day for Bank stocks, thanks to a warning from Wachovia Corp. You can see that this index is also stuck in limbo waiting to make a move. The big drivers today were the tech stocks like MSFT, HWP, IBM, and INTC, which all posted gains. In fact, MSFT is showing nice strength now that they are entering the appeals stage of their case.
The economic news of the morning didn't help the sentiment towards the Fed standing pat, but didn't hurt it much either. Industrial Production numbers rose by 0.4% instead of the 0.3% decline expected, but operating capacity remained unchanged. Also, the Labor Department reported that 296,000 Americans filed for unemployment benefits last week, signaling the tight labor market continues. And although these numbers weighed on the bond, it wasn't anything major. The 10-year Treasury note edged up to 6.07% from 6.03% on Wednesday. Bond traders also had to digest comments from Fed governor and voting member, Alfred Broaddus. He said that some of the cooling effects in the economy could just be temporary. He is a long time hawk though and could be just trying to talk down the markets. Remember, there are less than two weeks to the FOMC meeting on June 27th and 28th.
QCOM took it on the chin again today. Nothing like a lowered price target and lowered earnings estimates to scare off the buyers. H&Q took the honors for kicking the stock while it is down. Chase H&Q analyst, Edward Snyder, put a $50 price target on shares of Qualcomm and lowered his fiscal 2000 and 2001 earnings estimates. This caused QCOM's stock to fall by nearly 13% today. This comes after Bear Sterns lowered its estimates on Wednesday, when QCOM shares dropped 13% yesterday as well. He said the slowdown in Korea could reduce CDMA handset sales by 10 to 15%.
There was a major earnings report after the close today as well. Adobe beat the street by 0.03 cents in their second quarter and painted a bright picture for the future. They told investors to expect sales growth of at least 25% for the coming two quarters. ADBE had a record $300.1 million in revenue and a profit of $65.8 million, or $0.51 cents per share. This always active stock was bouncing after-hours too, trading as high as $126.50 and then back down near $121, after closing the regular session at $124.13. This is the second major company that reported solid earnings as CMGI did the same on Tuesday. Although, it hasn't done much for their stock price.
In looking at the charts, you can see how tight the range has formed on both the DJIA and Nasdaq. This is interesting and not something we are used to seeing lately. As I said Tuesday, I side with the Bulls. The inability for the market to sell- off bodes well for an earnings run. With that said, you are more safe viewing this in a market neutral stance. Let the breakout happen in either direction and play it accordingly. Stocks don't have to have an earnings run as we viewed last quarter.
Many sectors still look good to me. Drugs and Tech stocks, especially Fiberoptics, are strong. Can anything stop SDLI, up another $20 today? Or how about GLW tacking on another $12.75. The one thing that has gone somewhat unnoticed is the VIX. It is on the way down, currently at 23.18, closing right on the day low. This is the lowest level since mid-March. So maybe I'm not the only bull in town. But, it is getting down to the turning point, which we all know to watch out for, down near 20.
In reviewing the calls and puts with Jim today, we didn't see many stocks that were rolling over. Some were going up, while some were staying range-bound. That leaves us in a stock pickers market, like I mentioned above. And hey, that is not a bad thing. It is a leveling of the playing field for stocks to move on their own news and momentum. I am hoping for a breakout to the upside, but will trade the individual movers based on the technicals until the indices make there move. If it is lower, that is fine. I don't buy many puts ahead of earnings season, but I am always in search of that perfect entry point! Once again, the battle lines are drawn for the markets so plan your trades accordingly.
P.S. Look for Jim's analysis in the weekend edition of the Market Wrap.