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Thursday, February 5, 2009

Big tech rally

That Bank of America article in the WSJ this morning sent chills down my spine.  Moral hazard is utterly by the wayside.  We are through the looking glass here, people.  The bank fix is in but it doesn’t repair the damage or cure the ailment.  Time is what we need.  Policy makers, bank officials, and government fiduciaries are trying to craft a fast solution to a problem decades in the making.  It’s unlikely to work.

I see a number of stocks that have broken downtrends and are trying to form up channels.  That is an encouraging sign.  For the time being, though, I feel those stocks need to be sold into the strength.  I see caps at 98 on AAPL, 67 on AMZN, 356 on GOOG, 19 on ERTS, 16.80 on CSCO – to name a few that stick out.  VMW has had a nice move since I mentioned buying it at 20.6 – I’d make a sale here.

I would feel much better about this rally if they had taken everything down initially.  The SOX opened down 2 and traded up 10 from there.  Clearly there are a number of people who want to look through the near-term business trends and visibility issues to a greater tomorrow.  I would also like to do that but I fear that’s denial.  Cisco, for example, was expected to be poor – this was poorer than expected.  Inventory is working lower in the channel in general and thats good – but its starting to look like its following OEM business down – on a relative basis, inventory may not be dropping at all.  Cisco is the first major US OEM that has indicated severe weakness.  HPQ and DELL are other significant players.  My sense is Dell is going to be horrific – less so at HPQ.  Regardless, though, this validates the inventory reductions as being in line with lower demand – so far we’re not necessarily outpacing end demand on the downside.  I don’t think this is a time to buy strength.

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