I'm fearful of digressing Tuesday, since Monday's "action" was a real snoozer.
Yes, the market managed to slough off
Dell's (DELL Quote - Cramer on DELL - Stock Picks) warning, but who had assumed that the widespread weakness in the PC market wouldn't hit the once cult-like stock? And is anybody shocked to hear that the wireless business isn't exactly red-hot?
Texas Instruments' (TXN Quote - Cramer on TXN - Stock Picks) miss after the close, and its warning that things won't look very good until the economy improves, will be another test for the market Tuesday. For those who still thought that the PC and wireless businesses were just peachy, I guess the latest "news" will persuade all 12 of them to rein in their expectations. Everybody else should simply keep an eye on how the battered stocks behave, and use any collateral damage in the healthier segments of the tech sector to consider taking positions.
The latest piece of "dismal" news was the much sharper than expected decline in the
Index of Leading Economic Indicators (
definition |
chart |
source ) of 0.7%. However, upon further review, technical adjustments to this relatively insignificant metric accounted for the 0.3% surprise. It surely shows that the economy is slowing, but that's not exactly new news, either.
With nothing of importance on Tuesday's economic calendar -- but lots of earnings reports -- the focus will remain on companies' top and bottom lines and the outlook for the balance of the year. I continue to think that expectations are low enough, and the psychological benefit of a friendly
Fed will make this earnings season a time for the bulls to maintain control.
While I'm still very leery of the semiconductor group, with the
Philadelphia Stock Exchange Semiconductor Index, or SOX, likely to take out the 700 level, I'd view weakness in the wireless group this morning as a buying opportunity. My two favorites are
Ericsson (ERICY Quote - Cramer on ERICY - Stock Picks) and
Nextel (NXTL Quote - Cramer on NXTL - Stock Picks).
I also see further upside potential near term in tech names such as
Cisco (CSCO Quote - Cramer on CSCO - Stock Picks),
Microsoft (MSFT Quote - Cramer on MSFT - Stock Picks),
Oracle (ORCL Quote - Cramer on ORCL - Stock Picks) and
Siebel Systems (SEBL Quote - Cramer on SEBL - Stock Picks), which reports today.
I also like the retailers, such as
Federated Department Stores (FD Quote - Cramer on FD - Stock Picks),
Land's End (LE Quote - Cramer on LE - Stock Picks),
Talbot's (TLB Quote - Cramer on TLB - Stock Picks),
Wal-Mart (WMT Quote - Cramer on WMT - Stock Picks) and
Zale's (ZLC Quote - Cramer on ZLC - Stock Picks). Thank you,
Goldman Sachs and
Merrill Lynch:
Jones Apparel Group(JNY Quote - Cramer on JNY - Stock Picks) was just shy of making another high after Merrill upgraded the stock Monday along with other apparel manufacturers, and it's still very cheap.
So, look for the market to be tested again. Its resiliency indicates that most of the bad news is already in current prices, and a bit of consolidation is healthy. And a very difficult tape will also consistently test traders' mettle until things get a bit easier. However, I'd get more defensive should the
Nasdaq Composite Index take out the 2670 area on a closing basis, so traders should be sure to use relatively tight stops.
Bill Meehan
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