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The stock scan conducted after the close on Wednesday found 22 winners and 26 losers. The list of winners was ranked and sorted relative to performance against the S&P 500 and the NASDAQ 100 indexes. Click on the column headers below to sort other columns.

The scan is designed to find stocks that are current “in play”; criteria includes price movement, range and liquidity (500,000 shares on the day, 20-day average volume of 1.5 million shares). Please refer to the podcast for background information.

Read more

Trading Ideas for Wednesday featured 25 winners in a weak market. Seven of the day’s winners were from the semiconductor sector.

This sort of price action gives more confirmation that money is flowing into technology with Jim Cramer leading the charge:

• Momentum in Tech?
  The market favors momentum over fundamentals right now, Cramer said during Tuesday’s edition of Mad Money at the Half. CNBC’s Bob Pisani told Cramer Tuesday that this tech momentum trade was just a short-term trend as investors look to make some money. Pisani agreed with Cramer that the U.S. dollar was going to be “a serious headwind” for tech stocks in the second half of 2008.
• Cramer: Long Live Deflation

PHLX Semiconductor Sector Index ($SOX)

Daily bar chart with InVivo.RMI.Stops and InVivo.RMI.Histogram applied

In the above chart, I have marked off what technicians are watching. Points 1 and 2 showing a double bottom test and marked off the May highs as the point where the last time the bulls were enthusiastic.

Applied Materials (AMAT)

• Applied Materials Forecasts Orders That Top Estimates
  Orders will increase between 5 percent and 10 percent in the fourth quarter, which ends in October, from the previous three months, Chief Financial Officer George Davis said today on a conference call. Orders last quarter had fallen 16 percent from the previous period.
• Applied Materials’ earnings slide in tough market
  “I think it’s fair to say I expect capital spending to be up year-over-year in 2009,” Splinter said on the call. “As you know, the last time I said that, I really felt our third quarter was the bottom of the trough, and that we would see a modest recovery. I am sticking to that at this time.”

Daily bar chart with InVivo.RMI.Stops and InVivo.RMI.Histogram applied

Intel Corporation (INTC)

• Intel Net Rises With Global Laptop Sales
  Intel Corp. reported a 25% jump in second-quarter profit, as strong world-wide demand for portable computers that use its chips outweighed a slowing U.S. economy.

Daily bar chart with InVivo.RMI.Stops and InVivo.RMI.Histogram applied

Xilinx, Inc. (XLNX)

• Xilinx has lower quarterly net profit
  Programmable chipmaker Xilinx Inc (XLNX) on Wednesday posted a slightly lower quarterly net profit due mainly to restructuring charges but sales of new microchips rose 15 percent.
• Xilinx to cut 7% of workforce; shares rise
  The company’s CEO Moshe Gavrielov had said in April that the company planned to focus on “increasing operating efficiencies.”

Daily bar chart with InVivo.RMI.Stops and InVivo.RMI.Histogram applied

As we can see from the above charts, these stocks did not test their January 2008 lows during the recent major market weakness.

Will there be real money flow into the semis or will this be a false up move? We must pay attention to what the price action will be saying and how the market participants react emotionally.

As I said the other day, “The key thing to watch is this: if the broad markets pull back, will the technology sector emerge as a leader or laggard?”

There are certain fundamental truths about market survival that people tend to ignore or forget, just when they need it the most. Let’s look at some recent examples.

First, it has been reported that Bill Miller averaged down big time last month and now has an Enron-sized bet on Freddie Mac. While Miller has vigorously — even defiantly — defended is actions in his Q2 Commentary [DOWNLOAD PDF], the fact is that he has fallen into the classic trap for which Daniel Kahneman was awarded the 2002 Nobel Prize in Economics: prospect theory. May his faith in … regression toward the mean work out but what happens if Clayton is right and the financial sector remains “under-valued” longer than the Legg Mason Value Trust can stay solvent?

Second, there are limits to assumptions and backtesting. Rob Arnott made a big splash with fundamental indexation a few years ago. His analysis covered a period of 43 years, one that saw a huge expansion in financial services and leveraging. He can call the collapse of financial stocks the anti-bubble or whatever, but will his assumptions based on the past hold up into the future? Is his index fundamentally flawed?

I didn’t have time to grab the total return numbers from Bloomberg, but a look at his PowerShares FTSE RAFI US 1000 Portfolio ETF (in green) compared against suggested benchmarks of the S&P 500 ETF (cyan) and the Russell 1000 ETF (orange) tells you that something is not right.

Last, but not least, is the old saw that states if something is too good to be true, then it probably is. Yet, for some reason, even intelligent people can suspend reality for nearly an infinite amount of time when it comes to financial stuff. CFTC Commissioner Michael V. Dunn, chair the Foreign Currency Trading (Forex) Fraud Task Force said, “I would like to note that the Commission’s enforcement efforts can only accomplish so much. The first line of defense for potential customers/victims to avoid this type of fraud is education and common sense. This task force represents a major step toward developing and ensuring the effectiveness of this defense.”

The Stock Scan

The stock scan conducted after the close on Tuesday found 25 winners and 40 losers. The list of winners was ranked and sorted relative to performance against the S&P 500 and the NASDAQ 100 indexes. Click on the column headers below to sort other columns.

The scan is designed to find stocks that are current “in play”; criteria includes price movement, range and liquidity (500,000 shares on the day, 20-day average volume of 1.5 million shares). Please refer to the podcast for background information.

Read more

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