Premarket "DELL-lirious" 8-12-05

Good Morning

Overseas markets were mostly down and US futures, especially the NAZZ have been showing some real weakness (remember consider fair value when looking at the futures). The market was up yesterday however, once again we have decreasing volume on an up day. The volume trend seems clear recently: heavy volume on down days, lighter volume on up days (never a good sign).

Oil continues to confound most traders and is hovering around $66/barrel. We have been preaching that $65 - $67 would be a short-term top. The US Trade Balance came out this morning weaker than expected which is slightly inflationary. The combination of high Oil and high rates from inflation concerns will likely have a more dramatic effect on the market but thus far have been largely ignored. We would not feel comfortable betting on this complacency to last much longer.

The NAZZ is looking particularly "DELL-lirous". Last night DELL surprised many with poor guidance, complaining about low average selling prices (DELL's low average selling prices are disinflationary...no?). Fundamentally we must keep in mind the power of price elasticity in the tech sector. There is a point where low prices kick in exponentially to increase unit volume sales. DELL is historically keen on gaining market share from its competitors during times of low average selling prices. This is primarily because of its Just-In-Time inventory model.

We believe DELL will find its footing rather quickly and revert back to the company that consistently benefited in these type of situations in the past. Therefore, we would consider this quarter to be a temporary blip. We have our radar sights set on DELL for scaling into it. We would wait a little longer before we make our first purchase due to the fact that the stock is not exhibiting much signs of life yet. Perhaps around the $35 price point.

We will be watching closely to see if the NAZZ breaches the low from Wednesday around 2152. This would be more confirmation for the continuation of the down-trend that we have been harping on. Ideally for us, the market does breach that level, resulting in a more accelerated move to the downside sometime early next week. Keep in mind that we are not opposed to reversing our Bearish stance in a New York Minute, should the market show improved internals.

Cash is king for exactly these moments and we are feeling rather Royal.

-Good Trading-

___________________________________________________
The analysis, opinions and/or forecasts expressed on the Kcap Trading Blog (“KTB”) are for informational purposes only and should not be relied upon in making investment decisions. By using this site you agree that Kleiner Capital Management, LLC (“KCAP”) and its principals are not liable for any action you take or any decision you make in reliance on any content. Please be aware that there is no commitment by KCAP to update the KTB. Furthermore, there may be inconsistent timing and follow up (if any) of posts.
None of the information on KTB is considered individualized investment advice and should not be construed as a recommendation or solicitation to purchase any securities. Reliance on information provided on KTB in no way establishes an advisor-client relationship. Investors are encouraged to seek the advice of a qualified investment professional prior to investing funds.
Clients of KCAP, as well as the firm’s principals and other employees, may be invested in securities discussed at KTB. However, any mention of said securities is not intended to influence market conditions for the security to the benefit of KCAP clients and/or principals and employees. KCAP is not affiliated with any advertisers on this site and does not endorse any of their content. For additional information and disclosures, please visit www.kleinercapital.com.
The information on KTB has been furnished from sources we consider to be reliable, but no guarantee is made with respect to accuracy.
___________________________

Click Here To E-mail Comments