Intel (INTC) Stokes the Bulls

Submitted By Trader Mark
Well, it was nice while it lasted - as we predicted, after a 3-4 week hiatus the days of premarket surges and swoons has returned; for most of 2009 (ex Jan/Feb) its been surges. In fact, I wish someone who had the data would let us know how much of the monster rally off March 6th lows was in premarket hours.

Today's happiness is due to Intel (<a href="http://www.bestwaytoinvest.com/quote/INTC">INTC) which relative to expectations was a nice quarter. While revenue shrunk quite a bit from last year, they soundly beat expectations. I can't remember the last time Intel was a stock which moved the market this strongly - I'm having flashbacks to 1998. Business was strong (where else?) in Asia, especially (where else?) China; and even the U.S. consumer business was good. (not sure why) Europe was a disaster and enterprise spending (businesses) not so great, but the Asian influence and US consumer stood out. Margins were splendid.

In times like this technical analysis is relatively moot as we are reactive to news. TA works much better in the period we just came out the past month where we are not gapping up and down in knee jerk reaction. But a couple of points - I thought we'd rally at most into the ceiling of the recent range coming into the week, that is S&P 910 which was the 50 day exponential moving average. Those assumptions were outside of a herky jerky earnings period however.

These first 3 weeks are full of the big boys, US multinationals - and with the banks being given every advantage under the sun, and other companies benefiting from the weaker dollar in the past quarter along with exposure to China (and some other parts of Asia) I have been keeping my short exposure very low due to "surprises" like we are having. Plus so many American jobs have been cut, the expense line is really dropping for these companies so they can arbitrage expenses in the US with revenue gains in Asia and still do ok.

Is the Head and Shoulders pattern "done"? No, it's still "forming" - it will either fail or not once we get out of this range. After blasting north of S&P 910, we're already at S&P 920; a lot of resistance was faced at 930 about 2 weeks ago. For this pattern to be broken we'd need to see that 930 first broken and then a "new head" (at least matching recent highs from early June). Perhaps when JP Morgan (JPM) and Google (GOOG) "surprise us" Thursday night that might be the case Friday, we'll see.

To the downside we never finished the head and shoulders; the neck had to be broken - that was down there in the 875 - 880 level where we had a stick save by the market last week. We broke below intraday but that's not enough.

But taking a bigger picture view, we're just see sawing in a range and have been for months; now up to 2.5 months. So while there is a lot of analysis being thrown your way from the punditry we are really doing "nothing" in the big picture and simply churning from the top of a big range to the bottom. Bulls can be content that their bacon was saved last week, and a string of earnings "surprises" (really, was Goldman a surprise?) has called in the cavalry (thanks to Meredith Whitney as well), and further we are working off that huge move from the March 6th lows without a major breakdown. That seems strange to me, but ultimately all bottoms are tested in one way or the other - it's just a matter of when. A 7% pullback is not a test.

Bears on the other hand are probably quite frustrated as we're rallying on basically the same news we rallied last earnings report period... lack of revenue, cutting expenses like mad, stabilization quotes from CEOs and the like. While Intel (INTC) was good, and Altera (ALTR) was solid; Dell (DELL) not so good; Novellus (NVLS) not so good. So while it's easy to say "technology is great"; that is a very easy pundit like broad statement. But as always it is not the news, it is the reaction to the news. People are again looking at the good, and skipping over the bad - that must be respected. We'll see if these early positives by the multinationals set the bar higher and lead to some disappointment.

In the short term at some point in the 5-7 sessions I'd assume this morning's gap will be filled and it will be important for the 50 day moving average (S&P 910) to be held for bulls. S&P 930 is important to the top. So for now, we are in a new 20 point S&P range and we'll make decisions based on what happens at either end.

I'll check back in shortly to see if any of limit order shorts begin to hit.

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