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March 13, 2006

Weak Knees

Today was a pretty weak showing for a market that looked technically ready to bounce. The major indices broke higher at the open, then drifted lower through the day, going out near the lows. One of the weakest recent performers, Intel, fared no better than usual in today's action. The stock edged to a new 52-week low and appears to be ready to test fairly significant support around its 2004 low at $19.30. At that point I suspect the shares will either collapse or suffer a brief short covering rally and then collapse.

I may sound a bit dire regarding the prospects for Intel shareholders, but the company has very serious problems to deal with. Realignments such as the one Intel is experiencing only end with severe bouts of negative psychology. The worry curve for Intel is only just beginning to curve upward, and it would not surprise me at all to see the shares selling for less than a Hamilton down the road.

A star performer of the day was Apple, which rallied on an analyst upgrade. For Apple shareholders the upgrade was ready relief from the selling pressure the shares have felt over the passed two weeks. For Apple shareshorters, the pop may cause concerns of an interim rebound, unless of course one happens to be covered at the moment. I'm not sure where I will re-sell AAPL shares, but I'll note it here when I do.

Mining shares seemed to be immune to strong rises in the prices of gold and silver, which were up 1% and 2%, respectively. Like the miners, I'm still not convinced of the prospects for a big rally right here, so I'm not looking to beef up my positions at the moment. However, given my already substantial holdings, this is one instance where I certainly wouldn't mind being proven wrong.

Disclosure: Short INTC; Long INTC Puts


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