Go to Jeff Salisbury LWGate Home Page.From: Eric Jaenike <ericjaenike@yahoo.com>
Subject: [CANSLIM] OT 3
Date: Tue, 29 Oct 2002 09:17:15 -0800 (PST)
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- --0-1518115255-1035911835=:78208 Content-Type: text/plain; charset=us-ascii Eric Jaenike <ericjaenike@yahoo.com> wrote:Date: Mon, 21 Oct 2002 15:56:29 -0700 (PDT) From: Eric Jaenike Subject: Foundations Another explosive move up today, yet serious concerns remain. I hate to poop on the party tray, but volume was completely lacking today. If this rally is as strong and wonderful as the index numbers indicate, why are there fewer and fewer buyers participating? I would be much more sanguine about this rally if the rallies didn't come strictly on postive news, asset allocation moves (today), and if volume was supportive. The lack of buyer interest, as reflected in the anemic volume, is a massive red flag. Breadth has not been supportive during this rally, either. In a rally of this magnitude, you want to see strongly positive breadth, not modestly positive breadth, which we've been getting. Remember, the indices are dominated by a few large names. These names can move the markets in deceptive ways. Dig below the surface to get the true tone of the market. Consider Intel, which has moved back to $15, and was up about 7% today. Disproportionate impact on the QQQs and the Nasdaq. Trading at a 29 p/e on next year's earnings, projected to be $0.53. Is INTC worth that multiple, considering the maturity of its product line and their business strategy? Note the deterioration in gross margins, for 52% to 49%, in their recent call. That is because the vast majority of users do not need their high margin, highest speed processors. Will Intel lead this market from here? How much higher can it go? Is it really such a great buy here? And oh, by the way: Intel will probably actually post a LOSS next year, not the expected $.53. Well, at least its only the second largest stock in the Nasdaq 100, so it doesn't really matter, right? Or how about that IBM? Great call, right? Except they refused to provide guidance, EVEN FOR THE 4TH QUARTER. They didn't do that because business was so great. Certainly makes you confident in the 40% move they've had in the last 7 trading days. Well, at least they're not part of the Dow. Oh, wait, they are. Well, at least MSFT is rockin'. Huge quarter, great results across all product lines. Time to pile on. After all, who cares that Steve Ballmer said "We're not trying to say that we think the sales results of our first quarter will be sustainable -- it is kind of a one-time anomaly", or that "business remains reasonably tough around the globe." What the hell does he know? He's only the CEO. Now the analysts, they're the ticket. Why would they say something positive if it wasn't true? Ah, but the semiconductor book-to-bill, you say (the book-to-bill measures the number of orders received for each order shipped. 1.0 is break even, below 1 is contractionary, above 1 expanding). That's the real ticket. Except, of course, that the book to bill came in at a dismal .84. Doh! Of course, I'm being outspoken to make a point. My point isn't that this rally doesn't have legs. It might. My point is that we've come a long way incredibly fast. Price/volume on the indices has not been encouraging. Breadth has not been encouraging. Valuations, especially in tech, are not compelling (think INTC; and there are a lot of Intel's in the tech space). Leadership and breakouts have been on the low end of mediocre, especially considering the size of this rally. Former leaders have made huge runs (see above), and have carried the indices. I think this rally is dangerous. Again, I am NOT saying it won't have legs. There are 2 strong, driving forces that could carry us up: 1. the mutual fund complex. They care about performance relative to their benchmark, not whether they are actually making you money. They are more afraid of missing a rally than they are of losing your money, and they will chase a rally and pay up to avoid underperformance. They're buying can drive the indices hard. 2. Asset allocation programs, from bonds to stocks. I don't think it is a coincidence that bonds are getting pounded while stocks rally. The allocation committees also don't care about value. All they are concerned with is balancing their asset class allocations, and are price insensitive. Today's action looked very allocationish. These forces could propel us further. So again, be patient. Let the market reveal itself. If this is a solid bull, there will be time to play it. These parabolic moves are extremely dangerous, and are not sustainable over anything but the shortest time frames. Do not be concerned if you missed this move. This type of move looks great from a headline number, but the only people who capitalize on it are the ones who were long going into it. And if they were long going into it. they had been getting their heads kicked in. This type of explosive move up cannot be played consistently. Texas Instruments missed after the close (gee, a semiconductor company missing. Who'd a thunk it). Perhaps this will be the catalyst to help us determine whether this move will continue. Let's see what tomorrow brings. Eric - --------------------------------- Do you Yahoo!? Y! Web Hosting - Let the expert host your web site - --------------------------------- Do you Yahoo!? HotJobs - Search new jobs daily now - --0-1518115255-1035911835=:78208 Content-Type: text/html; charset=us-ascii <P> <P> <B><I>Eric Jaenike <ericjaenike@yahoo.com></I></B> wrote: <BLOCKQUOTE style="PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #1010ff 2px solid">Date: Mon, 21 Oct 2002 15:56:29 -0700 (PDT)<BR>From: Eric Jaenike <ERICJAENIKE@YAHOO.COM><BR>Subject: Foundations<BR><BR> <P>Another explosive move up today, yet serious concerns remain. I hate to poop on the party tray, but volume was completely lacking today. If this rally is as strong and wonderful as the index numbers indicate, why are there fewer and fewer buyers participating?</P> <P>I would be much more sanguine about this rally if the rallies didn't come strictly on postive news, asset allocation moves (today), and if volume was supportive. The lack of buyer interest, as reflected in the anemic volume, is a massive red flag. Breadth has not been supportive during this rally, either. In a rally of this magnitude, you want to see strongly positive breadth, not modestly positive breadth, which we've been getting.</P> <P>Remember, the indices are dominated by a few large names. These names can move the markets in deceptive ways. Dig below the surface to get the true tone of the market.</P> <P>Consider Intel, which has moved back to $15, and was up about 7% today. Disproportionate impact on the QQQs and the Nasdaq. Trading at a 29 p/e on next year's earnings, projected to be $0.53. Is INTC worth that multiple, considering the maturity of its product line and their business strategy? Note the deterioration in gross margins, for 52% to 49%, in their recent call. That is because the vast majority of users do not need their high margin, highest speed processors. Will Intel lead this market from here? How much higher can it go? Is it really such a great buy here? And oh, by the way: Intel will probably actually post a LOSS next year, not the expected $.53. Well, at least its only the second largest stock in the Nasdaq 100, so it doesn't really matter, right?</P> <P>Or how about that IBM? Great call, right? Except they refused to provide guidance, EVEN FOR THE 4TH QUARTER. They didn't do that because business was so great. Certainly makes you confident in the 40% move they've had in the last 7 trading days. Well, at least they're not part of the Dow. Oh, wait, they are.</P> <P>Well, at least MSFT is rockin'. Huge quarter, great results across all product lines. Time to pile on. After all, who cares that Steve Ballmer said "We're not trying to say that we think the sales results of our first quarter will be sustainable -- it is kind of a one-time anomaly", or that "business remains reasonably tough around the globe." What the hell does he know? He's only the CEO. Now the analysts, they're the ticket. Why would they say something positive if it wasn't true?</P> <P>Ah, but the semiconductor book-to-bill, you say (the book-to-bill measures the number of orders received for each order shipped. 1.0 is break even, below 1 is contractionary, above 1 expanding). That's the real ticket. Except, of course, that the book to bill came in at a dismal .84. Doh!</P> <P>Of course, I'm being outspoken to make a point. My point isn't that this rally doesn't have legs. It might. My point is that we've come a long way incredibly fast. Price/volume on the indices has not been encouraging. Breadth has not been encouraging. Valuations, especially in tech, are not compelling (think INTC; and there are a lot of Intel's in the tech space). Leadership and breakouts have been on the low end of mediocre, especially considering the size of this rally. Former leaders have made huge runs (see above), and have carried the indices. I think this rally is dangerous.</P> <P>Again, I am NOT saying it won't have legs. There are 2 strong, driving forces that could carry us up: 1. the mutual fund complex. They care about performance relative to their benchmark, not whether they are actually making you money. They are more afraid of missing a rally than they are of losing your money, and they will chase a rally and pay up to avoid underperformance. They're buying can drive the indices hard. 2. Asset allocation programs, from bonds to stocks. I don't think it is a coincidence that bonds are getting pounded while stocks rally. The allocation committees also don't care about value. All they are concerned with is balancing their asset class allocations, and are price insensitive. Today's action looked very allocationish. These forces could propel us further.</P> <P>So again, be patient. Let the market reveal itself. If this is a solid bull, there will be time to play it. These parabolic moves are extremely dangerous, and are not sustainable over anything but the shortest time frames. Do not be concerned if you missed this move. This type of move looks great from a headline number, but the only people who capitalize on it are the ones who were long going into it. And if they were long going into it. they had been getting their heads kicked in. This type of explosive move up cannot be played consistently.</P> <P>Texas Instruments missed after the close (gee, a semiconductor company missing. Who'd a thunk it). Perhaps this will be the catalyst to help us determine whether this move will continue. Let's see what tomorrow brings.</P> <P>Eric</P> <P> </P> <P> </P> <P><BR> <HR SIZE=1> Do you Yahoo!?<BR><A href="http://webhosting.yahoo.com/">Y! Web Hosting</A> - Let the expert host your web site</BLOCKQUOTE><p><br><hr size=1>Do you Yahoo!?<br> <a href="http://rd.yahoo.com/careers/mailsig/*http://www.hotjobs.com ">HotJobs</a> - Search new jobs daily now - --0-1518115255-1035911835=:78208-- - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email.
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