Rev Shark:
Danger in Tech Can't Be Ignored
3/14/05 8:39 AM ET
Turning and turning in the widening gyre The falcon cannot hear the falconer; Things fall apart; the centre cannot hold... The best lack all conviction, while the worst Are full of passionate intensity.
-- William Butler Yeats
Although the S&P 500 and the Dow are down only slightly from multiple-year highs, the vortex of negativity increased substantially last week and the swirling winds of change are building. There is no worthy leadership in which we can have confidence and conviction. Interest rates and inflation concerns have been building in intensity and have the potential to weigh heavily on the market.
The picture is not a pretty one for the bulls. There was hope last weak that a pullback in oils, homebuilders and commodity-related stocks would help trigger a move into technology, financials and retail, which then would then lead the market. However, the inability of Intel (INTC:Nasdaq) to rally on good news made it clear that investors were not ready to embrace technology stocks.
Oil stocks pulled back slightly, but it looked more like a correction after a parabolic move rather than a major reversal. Steel stocks, which have been a leader, also pulled back but managed to bounce on Friday as a major company in the sector announced strong earnings.
Earnings are always important and investors are keenly aware that oils, homebuilders, steel and commodity stocks will be posting big first-quarter earnings reports, while technology stocks and other key groups are unlikely to deliver substantial upside. It is tough to make a compelling fundamental case for the stocks that the bulls would like to see lead at this point, and with warnings season rapidly approaching, the danger, especially in technology stocks, can't be ignored.
Without leadership, other than oil, and raising inflation and interest rate pressure there is little question that this market has some major problems to surmount. Can it do it? Maybe, but it isn't the smart bet. This is a time to be defensive and focus on preserving capital. If new leadership emerges we will have time to react to it, but the key right now is to not anticipate strength when there are so many negatives at work.
We have a slightly positive open on the way. Overseas markets are mixed. Oil is down slightly on comments from Saudi Arabia about increasing production. The dollar is bouncing a bit and gold is down.
It is likely to be tough slogging and I'm going to fortify myself with an extra cup of coffee.
No positions in stocks mentioned.
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Gary B. Smith:
