Wednesday, August 17, 2011

Focusing On Tech Guidance Tonight

The earnings reports are coming in, and right now the reactions are ugly. The tone is clearly becoming cautious looking into next quarter. For the most part, the reports for the past quarter have been good, but the outlooks are just not there.

The weight thus far is being felt by the Nasdaq, but how long can equities withstand more and more cautious outlooks before shattering? The technical picture is still cautious, but these earnings outlooks are beyond cautious. The debt situations around the world look like they may be getting into the psychology of businesses. On top of the sovereign debt issues and the lack of job growth, the world economies cannot lose the positive psychology of big business. Perhaps we aren't positive, but if mentality swings to negative, then equities could have a long way down.

JDSU continues the reign of the optical bears. They reported results in line with EPS estimates and slightly better revenue, but guidance is weak.

NTAP echoed that sentiment, and both stocks are paying up dearly right now. JDSU dipped all the way below $10, but it has bounced back to support around $10.70, but this may also act as resistance. Over $10.70, there is a chance for a bounce up to $11.50. This group just can't adjust its inventory fast enough, and now it is JDSU's turn to experience an inventory correction. For many in the sector, it is now the third or fourth quarter of the "correction," which makes you wonder just how short-lived it will be for JDSU, even though that is the claim of management. The only hope here may be the decision of traders that all the bad news -- and then some -- is priced into shares and this sector.

NetApp is getting hit even harder than JDSU after hours. NTAP bulls need to defend $37 and make a push back to $39, or else $35 seems very likely in short fashion. CREE announced a $525 million purchase of Ruud Lighting. Cree is issuing 6 million shares with this purchase as well as laying down $372 million in cash. Unfortunately, this is about one-third of Cree's cash position, and Cree is now guiding the quarter toward the low end of its range of $0.25 to $0.28 a share in earnings. The stock needs to hold $32, or else I would look for a target of $30.

Many folks are waiting for the rollover in gold. I am too, but I just don't feel it yet.