Ralph Acampora: 10/7/02 Monday Technical Commentary

» Kirk - 10/7/02 Monday Technical Commentary

For example, take a look at Intel (INTC-$17.31-Buy). In my opinion, this stock is going the way of Sun Microsystems (SUNW-$2.42-Buy) to the $2.00 to $4.00 range.

WOW!

Ralph Acampora

Managing Director, Global Equity Research
10/7/2002 10:10:05 AM

Today I wanted to start where I left off last Monday and compare today's market with a couple of previous markets.

In 1974, the S&P 500 formed a double bottom, with the second bottom being a higher bottom. This bottom was accompanied by a crossover on the momentum chart, which eventually led to a breakout on the index. Also notice the bottom formed in 1998. Again we had a double bottom, a crossover on the momentum chart, and a breakout on the chart, thus putting the bull market back in effect. Today's market is not giving us the signs we need to see to support a bottom. Last Friday the S&P 500 came down and while it did not close below the intra-day low, we have yet to see a crossover on the momentum chart.

Hopefully in the next couple of days we will see this momentum shift. I don't think this will happen, but this is what we need to have happen in order to secure a double bottom. If you look at the COMP, the NDX, the SOX, the Russell 2000, none of these indexes are showing any signs of a double bottom. Now if you look at the Russell 2000, last September we were very oversold. Off this oversold level we were able to obtain a seven-month rally. If you look at the most recent bottom of the Russell 2000, we were only able to achieve a five-week rally before rolling over and moving to a lower low.

You are also seeing this in individual stocks. For example, take a look at Intel (INTC-$17.31-Buy). In my opinion, this stock is going the way of Sun Microsystems (SUNW-$2.42-Buy) to the $2.00 to $4.00 range. Also, look at Centex Construction (CXP-$36.60-NR). Everyone is talking about a housing boom. We'll forget about the boom. Stocks in this group are starting to roll over. You also heard our Chief Strategist tell us you cannot have a bull market without the financials. Well, if you look at Morgan Stanley Dean Witter (MWD-$31.03-BUY) or Fannie Mae (FNM-$63.15-BUY), these stocks are in the mist of major breakdown. The bottom line is that 75% of the S&P 500 groups are either below their July lows or within 10% of their lows, so the picture is not very good. I also went through the 30 Dow stocks to try and get some kind of target. On the upside you could possibly see at most a rally to the 8900 area. On the down side you could very easily see an initial move to 6500 and then potentially 5500.

Disclaimer:

The research analyst, a member of the team, or a member of the research analyst's household has a financial interest in Sun Microsystems. Prudential Securities has no knowledge of any material conflict of interest involving the companies mentioned in this report and our firm. Prudential Securities Incorporated makes a market in the shares of Intel Corp.; and Sun Microsystems. Prudential Securities Incorporated and/or its subsidiaries have managed or comanaged a public offering of securities for Morgan Stanley in the past 12 months, have received compensation for investment banking services from this company in the past 12 months, or expect to receive or intend to seek compensation for investment banking services from this company in the next 3 months. The research analyst or a member of the team does not have an actual material conflict of interest relative to any stock mentioned in this report. The research analyst has not received compensation that is based upon (among other factors) the firm's investment banking revenues as it relates to any stock mentioned in this report. The research analyst, a member of the team, or a member of the household does not serve as an officer, director, or advisory board member of any stock mentioned in this report. When we assign a Buy rating, we mean that we believe that a stock of average or below average risk offers the potential for total return of 15% or more over the next 12 to 18 months. For higher risk stocks, we may require a higher potential return to assign a Buy rating. When we reiterate a Buy rating, we are stating our belief that our price target is achievable over the next 12 to 18 months. When we assign a Sell rating, we mean that we believe that a stock of average or above average risk has the potential to decline 15% or more over the next 12 to 18 months. For lower risk stocks, a lower potential decline may be sufficient to warrant a Sell rating. When we reiterate a Sell rating, we are stating our belief that our price target is achievable over the next 12 to 18 months. A Hold rating signifies our belief that a stock does not present sufficient upside or downside potential to warrant a Buy or Sell rating, either because we view the stock as fairly valued or because we believe that there is too much uncertainty with regard to key variables for us to rate the stock a Buy or Sell. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources, believed to be reliable. However, such information has not been verified by us, and we do not make any representations as to its accuracy or completeness. Any statements nonfactual in nature constitute only current opinions, which are subject to change. Prudential Securities Incorporated (or one of its affiliates or subsidiaries) or their officers, directors, analysts, employees, agents, independent contractors or consultants may have positions in securities or commodities referred to herein, and may, as principal or agent, buy and sell such securities or commodities. An employee, analyst, officer, agent, independent contractor, a director, or a consultant of Prudential Securities Incorporated, its affiliates or its subsidiaries may serve as a director for companies mentioned in this report. Please contact your Sales Representative with any questions about this research.

-- posted by Kirk