Wednesday, July 14, 2010

At Least For Now, INTC Once Again Could Not Hold Last Night's After-Hours Gains

A little spike in the final minutes put the indices in the green, but overall, it was another example of how good news from INTC is not such great news for the market. The buyers were quite excited last night over the comment from Intel that it was its best quarter ever, but Intel is just one of those stocks that people like to sell when it is at its strongest.

It absolutely should not, but based on past experience I would not be surprised if Intel continued to fade in the weeks ahead, but the more important issue is whether it will mark a short-term top, like it did the last two quarters. Technically, we are very ripe for a pullback as we hit technical resistance. A pullback could be quite healthy, if it stayed contained and allowed us to consolidate the last seven days of gains. The biggest danger is that there will be a rush to lock in recent gains if selling intensifies.

Earnings from JPM will be the main focus in the morning, followed by GOOG after the close. We are set up well for a further sell-the-news reaction to these reports, so I'd maintain some caution.

Aside from Intel, the most interesting news today was the minutes from the Fed's meeting in June. The FOMC made it clear it is contemplating further monetary stimulus should the economy continue to slow. It also cut economic predictions due to concerns about the weak job market.

The question the Fed minutes raises for investors is whether it is good news that we might see another flood of cheap money, or bad news that we might need it? The cheap money is what gave us the rally that started in March 2009, but it calls to mind economist Paul Samuelson's famous dictum that "there is no free lunch on the monetarist menu".....

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