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Thursday, September 09, 2004
Good evening friends,
Market Recap
The stock market was unaffected by the rising price of oil, up today by $1.80. The resiliency of the market has been remarkable considering all the bad news we have had along with the uncertainty of the upcoming election. Normally a rise in oil prices like we saw today would have the market selling off in a big way. Instead, the NASDAQ was up by +19 points, held up by the SOX index which was coincidently also up +18 points today on good earnings news from the big chip player TXN. The whole semiconductor sector was up, including the heavy weight INTC. When these big caps move up, the SOX will also move up, and when the SOX moves, so will the NASDAQ. This good earnings news was enough to keep the NASDAQ above water while the Dow dropped -24 points.
The NASDAQ also closed above its 50 SMA and the volume today was well above average. We may be starting to see some of the volume we expected to come this week. This would be a positive for the overall market if this volume is to the upside as it was for the NASDAQ today. Now with all three indexes above their 50 SMA's, the last indicator to watch is the NASDAQ to cross above its 200 SMA. When the NASDAQ crosses its 200 SMA and is able to hold, we should be on our way to a big year end/post election rally.
A Case Study: TXN vs. INTC
Earnings are all about analyst expectations. It does not really matter what a company earns, what matters to the average investor is if the earnings exceeded the expectations of the analyst. These investors have been programmed to react to the analyst instead of reading the balance sheets for themselves. This is the reason stocks react the way they do. There are far more average investors in the market than there are professionals. Intel recently released earnings that were good, but they guided lower than what analyst were expecting and the stock was crushed. Texas Instruments released their earnings and like INCT, they also warned of inventory issues. The difference between these companies is that TXN will meet previously lowered analyst expectations. Today, TXN is up 10% on massive volume. Both these big chip companies face the same issues, but the market views each differently. It does not make much sense on the surface but if you know how the market works, you know how the crowd will react based on what the analyst have said.
Hurricane Effect
Oil prices were up today due to concerns of an oil shortage now that there is another hurricane out in the Atlantic. Many people may not consider is how oil makes its way to U.S. refineries. Oil is shipped in, and those ships do not want to be in port if there is a category 5 hurricane knocking on the door. They do not want to even be within several hundred miles of the storm. Whenever there are major storms in the Atlantic or Pacific, shipping lanes are often interrupted. If shipping is slowed down then commerce is slowed down as well.
Not to make light of the hurricane situation but for those who trade commodities, many of the commodities that Florida is known for will most certainly be affected by these disasters. Keep a close eye on the hurricane and the resulting affect on the orange crop.
Speaking of the hurricane; God bless all our TWPD members that live in the Florida area. Ivan is currently a category 5 hurricane and that is as bad as they get. Our thoughts and prayers are with you as you recover from the last two Hurricanes and we all pray that you do not get hit by Ivan.
OTC BB watch list
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