investmenttool.com Cover Story

Ameritech breaks the law

Last week things seemed as bad as they could get for equities. Every piece of good news was destroyed by a seemingly larger piece of bad. This seems to be a market with no momentum. It can't get traction. Good news gets you nowhere, but bad news gets you down. Is there hope? Yes. Where do we find it? Friday.

The news was going to be horrible and the market was going to get hammered. Intel announced that they were lowering forecasts for the current quarter and investors shuddered. September 21 lows were predicted and there was no good news to be found.

But wait, there was good news last week. Oracle announced it was not warning. 100% dependent on corporate IT spending, this should have helped the market. It did not.

Stocks dropped like rocks in a pond Friday morning. At one point the NASDAQ was below 1500. If the market is going to capitulate though, it does not recover during the day. It closes on the lows. That is not what happened Friday.

The market closed down only a drop more than 1%. Hardly the kind of reaction you'd expect after bad news from a bell weather like Intel. The fact that the pessimists and most of the financial press missed was this was priced into the market already. Stocks have been dropping for months on the basis that things were tough and the recovery was going to be slow.

Everybody knew that Intel was going to warn. Hewlett-Packard said times were tough. Gateway and e-machines are desperately cutting prices to move unsold inventory. Only Dell computer is profitable and gobbling up market share because they have no inventory.

In short, Intel's announcement wasn't news. It was an excuse for institutions to justify dumping some more stock. Someone went back into the market to buy stocks, lifting them far above their lows. Oracle had and up day. JDS Uniphase, which had no reason to be happy was up strongly. Dell finished the day down 8 cents a share.

The overall outlook for the economy continues to improve. One stock does not the market make. Intel is going to suffer because the above mentioned companies that build without buyers are going to cut orders to move inventory. That says nothing about the stealth recovery in Corporate IT spending. It says nothing about the overall economy.

Stay tuned investors, the worse might not be over, but Friday's trading was a very hopeful sign.

For our front page, click here.

Shmuel Protter
investmenttool.com

Send this page to a friend

Friends Email (Required):
Your Email (Required)    :
Your Name (Required)    :

Enter your message to your friend (optional):

Return Email receipt: Yes No
Join Stockwatch Alert Mailing list: Yes No

---

Join Stockwatch Alert mailing list.

---

---