Brigitte
21.11.2000, 12:58
* * * *
11/20/00 Investment House Daily
* * * *
Investment House Daily Subscribers:
*
TONIGHT:
- Nasdaq testing the year low while Dow and S&P 500 testing support as
well.
- Downgrades are flying on techs and even healthcare. Is this real
analysis or payback?
- The market keeps getting hammered, but the negative sentiment is just
not there.
- Money everywhere but the market.
- Subscriber Questions
- Team Trades
*
Monday was a loss before it even started.
*
With some of the major players in the networking sector getting tagged
with downgrades by Morgan Stanley Dean Witter before the open, it was just
a matter of seeing how much blood an already weary stock market was going
to let fly this day. The Nasdaq gapped down 84 points to 2943.11 and then
rallied quickly to 2949.50. That turned out to be the high for the day,
though it did test that in the last hour before just dropping off the
table in the last half hour.
*
The Nasdaq kissed the year low hit just 6 sessions ago (last Monday at
2859.39) and bounced up almost to its session high as the hearing in the
Florida supreme court was underway. When it hit the wires with about 40
minutes left in the session that the court's questioning appeared to be
more activist, the indexes dropped sharply. The Nasdaq did not hit the
session low, but was not far from it at 2875.64 on the close. The Dow
fell through support and is now looking to re-test 10,300 to 10,350. The
S&P 500 crashed back to the lows on the session, closing at 1342.62, just
above support at 1335. They finished near the lows for the session,
showing downward momentum at the close. It is never good to see that
downward momentum going into the close as it bodes ill for the next
session, but we have to admit that even when the market bounces before the
close that really has meant little as to where the next session started.
*
Downgrades hit the last strong tech sector and even some of the strong
defensive sectors.
*
When you thought every bit of bad news out there had hit tech stocks, the
analysts seem to be able to spread some more holiday jeer on investors.
Before the open CSCO, JNPR and RBAK, all in the rapidly growing networking
sector (arguably the most profitable sector in technology right now)
received downgrades. CSCO was cut from a target of $95 to $70, and JNPR
and RBAK were downgraded from strong buy to outperform. That set off
selling in all of these stocks, as well as others in the sector (e.g.,
BRCD). It was pretty ugly as this one holdout sector got whacked.
*
Was Morgan Stanley making an honest call or trying to take out the last
strong tech sector to try and finally get everything washed out for a move
back up? Or, was the brokerage giving some payback to the SEC for its new
rule, basically saying we are going to downgrade any stock still standing
as we think things are slowing and we are not going to be able to get the
cozy, inside information we usually get to make profitable trades ahead of
everyone else? Instead, we are going to short those stocks, drop the
bombshell, take the money and laugh. Hell, it is legal for them to do it,
but woe be to some poor slob who tries to do the same on his own. Not
that the latter is right at all, but the former certainly cannot be right
either. If the SEC wants to control these shenanigans, it needs to put a
lid on the free hand analysts have to issue these reports. We are not for
more government intervention, but obviously the current system is far, far
from the best. A simple solution, or at least deterrent, would be to
require the analysts and their brokerage houses to list all of their
positions in the security (short, long, you name it), when it was taken,
at what price, and any other information an interested party would need to
make a decision as to whether the upgrade or downgrade had any real merit.
*
Another question we have to ask is how did Morgan come up with its
information? Not two weeks ago Cisco upped its own earnings estimates for
the coming year and talked of increasing demand. JNPR reported blowout
earnings in October and it too stated that demand was huge and it was
taking market share. And these two companies, particularly Cisco, are not
ones that make such assertions lightly; they have a good track record with
their projections. As one of our frustrated subscribers stated today
"What gets me is that if Cisco has already issued forward guidance for the
next few quarters re strong demand and no profit warnings, what are the
facts behind the "brainless" analyst's comments re "the likelihood of a
slowdown ... blah blah blah" except that he was JUST TALKING at the
expense of the entire networking sector and their faithful investors?" We
have seen a lot of analysts that have been simply speculating on the
future of sectors, not based on real research, just "anecdotal evidence",
i.e., a gut feeling.
*
We are seeing a combination of themes. The SEC just took away favored
nations status in brokerages regarding financial information. There is a
lot of pressure to perform or get a leg up on competition, but there is
not that cozy pipeline of information anymore. They still want to make a
name for themselves, but they have to do it alone. Thus the calls made on
'anecdotal evidence.' The implication is that is all they have to work
with now that the SEC has cut off the milk run, and now investors are just
going to have to deal with the 'uneven flow' of information (as if one
small group getting the information ahead of time under the previous
scheme was somehow more even or fair). Finally, way too much emphasis is
put on these calls by these folks who have vested interests in certain
stocks, and who have no better information than anyone else. Think about
it. Without the inside pipeline or illegal information, they have no
better resources than any investor. Moreover, we would bet that they are
not as good at using these resources as the rest of us who do this for
ourselves anyway. The field has been leveled regarding information, but
the power of these analysts is still lingering for now. It is our hope
that it fades as investors realize their calls are more or less bogus.
*
THE MARKETS
*
The markets were rocked from the open, tried to recover later in the day,
but then failed in that attempt. That is a familiar theme this year. No
holiday good will in the markets today. And we can expect lighter and
lighter volume as the week progresses, noting that today volume was again
lighter and below average. No one wants to open the wallets and venture
into the market.
*
And the wallets do have money. We have to realize that a lot of
liquidation has gone on since August alone. We understand that there is
over $60 billion from October alone that is sitting around in savings
accounts, most likely waiting for some of the uncertainties to be
answered: election, economy, and earnings. If we get the election and a
Fed rate cut under the belt, things should start firming up. Of course,
just those two events seems more like a pipedream right now than a
near-term possibility.
*
Overall market stats:
*
Sentiment indicators are not helping matters. Bullishness is still way to
high. That does not bode well for any attempted rally from this point, at
least a rally that has a lot of strength. It might give us another
sputter upward for a few days as we have seen; it could even give us a
week. Problem is, if the majority is still bullish and somewhat invested,
there is not a lot of extra push to keep a rally going as people jump back
in. Indeed, the fact that a lot of people are still invested means that
those investors are tempted to sell out in the next rally to get some
money back. It is when everyone
11/20/00 Investment House Daily
* * * *
Investment House Daily Subscribers:
*
TONIGHT:
- Nasdaq testing the year low while Dow and S&P 500 testing support as
well.
- Downgrades are flying on techs and even healthcare. Is this real
analysis or payback?
- The market keeps getting hammered, but the negative sentiment is just
not there.
- Money everywhere but the market.
- Subscriber Questions
- Team Trades
*
Monday was a loss before it even started.
*
With some of the major players in the networking sector getting tagged
with downgrades by Morgan Stanley Dean Witter before the open, it was just
a matter of seeing how much blood an already weary stock market was going
to let fly this day. The Nasdaq gapped down 84 points to 2943.11 and then
rallied quickly to 2949.50. That turned out to be the high for the day,
though it did test that in the last hour before just dropping off the
table in the last half hour.
*
The Nasdaq kissed the year low hit just 6 sessions ago (last Monday at
2859.39) and bounced up almost to its session high as the hearing in the
Florida supreme court was underway. When it hit the wires with about 40
minutes left in the session that the court's questioning appeared to be
more activist, the indexes dropped sharply. The Nasdaq did not hit the
session low, but was not far from it at 2875.64 on the close. The Dow
fell through support and is now looking to re-test 10,300 to 10,350. The
S&P 500 crashed back to the lows on the session, closing at 1342.62, just
above support at 1335. They finished near the lows for the session,
showing downward momentum at the close. It is never good to see that
downward momentum going into the close as it bodes ill for the next
session, but we have to admit that even when the market bounces before the
close that really has meant little as to where the next session started.
*
Downgrades hit the last strong tech sector and even some of the strong
defensive sectors.
*
When you thought every bit of bad news out there had hit tech stocks, the
analysts seem to be able to spread some more holiday jeer on investors.
Before the open CSCO, JNPR and RBAK, all in the rapidly growing networking
sector (arguably the most profitable sector in technology right now)
received downgrades. CSCO was cut from a target of $95 to $70, and JNPR
and RBAK were downgraded from strong buy to outperform. That set off
selling in all of these stocks, as well as others in the sector (e.g.,
BRCD). It was pretty ugly as this one holdout sector got whacked.
*
Was Morgan Stanley making an honest call or trying to take out the last
strong tech sector to try and finally get everything washed out for a move
back up? Or, was the brokerage giving some payback to the SEC for its new
rule, basically saying we are going to downgrade any stock still standing
as we think things are slowing and we are not going to be able to get the
cozy, inside information we usually get to make profitable trades ahead of
everyone else? Instead, we are going to short those stocks, drop the
bombshell, take the money and laugh. Hell, it is legal for them to do it,
but woe be to some poor slob who tries to do the same on his own. Not
that the latter is right at all, but the former certainly cannot be right
either. If the SEC wants to control these shenanigans, it needs to put a
lid on the free hand analysts have to issue these reports. We are not for
more government intervention, but obviously the current system is far, far
from the best. A simple solution, or at least deterrent, would be to
require the analysts and their brokerage houses to list all of their
positions in the security (short, long, you name it), when it was taken,
at what price, and any other information an interested party would need to
make a decision as to whether the upgrade or downgrade had any real merit.
*
Another question we have to ask is how did Morgan come up with its
information? Not two weeks ago Cisco upped its own earnings estimates for
the coming year and talked of increasing demand. JNPR reported blowout
earnings in October and it too stated that demand was huge and it was
taking market share. And these two companies, particularly Cisco, are not
ones that make such assertions lightly; they have a good track record with
their projections. As one of our frustrated subscribers stated today
"What gets me is that if Cisco has already issued forward guidance for the
next few quarters re strong demand and no profit warnings, what are the
facts behind the "brainless" analyst's comments re "the likelihood of a
slowdown ... blah blah blah" except that he was JUST TALKING at the
expense of the entire networking sector and their faithful investors?" We
have seen a lot of analysts that have been simply speculating on the
future of sectors, not based on real research, just "anecdotal evidence",
i.e., a gut feeling.
*
We are seeing a combination of themes. The SEC just took away favored
nations status in brokerages regarding financial information. There is a
lot of pressure to perform or get a leg up on competition, but there is
not that cozy pipeline of information anymore. They still want to make a
name for themselves, but they have to do it alone. Thus the calls made on
'anecdotal evidence.' The implication is that is all they have to work
with now that the SEC has cut off the milk run, and now investors are just
going to have to deal with the 'uneven flow' of information (as if one
small group getting the information ahead of time under the previous
scheme was somehow more even or fair). Finally, way too much emphasis is
put on these calls by these folks who have vested interests in certain
stocks, and who have no better information than anyone else. Think about
it. Without the inside pipeline or illegal information, they have no
better resources than any investor. Moreover, we would bet that they are
not as good at using these resources as the rest of us who do this for
ourselves anyway. The field has been leveled regarding information, but
the power of these analysts is still lingering for now. It is our hope
that it fades as investors realize their calls are more or less bogus.
*
THE MARKETS
*
The markets were rocked from the open, tried to recover later in the day,
but then failed in that attempt. That is a familiar theme this year. No
holiday good will in the markets today. And we can expect lighter and
lighter volume as the week progresses, noting that today volume was again
lighter and below average. No one wants to open the wallets and venture
into the market.
*
And the wallets do have money. We have to realize that a lot of
liquidation has gone on since August alone. We understand that there is
over $60 billion from October alone that is sitting around in savings
accounts, most likely waiting for some of the uncertainties to be
answered: election, economy, and earnings. If we get the election and a
Fed rate cut under the belt, things should start firming up. Of course,
just those two events seems more like a pipedream right now than a
near-term possibility.
*
Overall market stats:
*
Sentiment indicators are not helping matters. Bullishness is still way to
high. That does not bode well for any attempted rally from this point, at
least a rally that has a lot of strength. It might give us another
sputter upward for a few days as we have seen; it could even give us a
week. Problem is, if the majority is still bullish and somewhat invested,
there is not a lot of extra push to keep a rally going as people jump back
in. Indeed, the fact that a lot of people are still invested means that
those investors are tempted to sell out in the next rally to get some
money back. It is when everyone