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June 22, 2006

Hand Me A No Doze

Today's post will be short since there is really not a whole lot to be said about today's session. Traders seem to be reluctant to make any serious commitments ahead of next week's Fed meeting, and I would expect volatility to remain muted until then, barring some sort of dramatic event on the geopolitical front. The good news is this waiting period will give traders enough time to reset their perspectives, though I know some traders do quite poorly when they are allowed to think too muchÂ… thinking interferes with the instinct on which they thrive. Lower volatility may also help trim option premiums, which became quite pricey over the last few weeks, and give me a chance to reload on some favorites.

Tech indices such as the Nasdaq 100 dropped about one percent, weighed down by semiconductors. The head honcho of the semis, Intel, fell a rather tame half percent compared to the 1.4% drop in the SOX, but they made news today with the opening of a new fab plant in Ireland. Intel completed the plant more than $200M over budget when state aid promised by Ireland was vetoed by the EU as being illegal. This opening goes along with their plans to completely refurbish a New Mexico plant, announced several months ago. Nothing like ramping up capacity when inventory is skyrocketing! I simply can't shake the expectation that one of the next two quarterly reports will spell out disaster for this company.

The overall damage on the market was not as bad as the tech-heavy indices would have us believe. Broader indices lost only about a half percent today. One warning shot was heard from Bed, Bath & Beyond, which provided a poor earnings report, blaming higher costs. I wonder how frequently we will hear that sob story in next month's earnings period?

Disclosure: Short INTC; Long INTC Puts


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