MSFT and THE TECH BUST – Part II

Economic busts are very strange. Though they are very fast and ruthless, one tends to hear and feel them for decades. The vibrations continue to stay in the system and the love which turns to hate rarely returns. Microsoft may be a great company, but the TECH bubble left it shaken. The stock price got into a multi year consolidation and never dared to reach 2000 highs.
Now that we are facing the other bust, the credit bust, the old tech dust has also got stirred up a bit. Microsoft’s multi year text book consolidation seems ready to break down. The last few trading weeks has pushed the stock over the edge back to Dec 2000 low. Technology is an early economic sector and should underperform most sectors, barring financials and discretionary, which are part of the same early economic cycle sector. We will not be surprised if the stock actually tanks down below psychological 20 to near 14 levels. This is classic A-B-C circle corrective down, whose time seems to have come.
Now if Microsoft cracks, most technology sector would see selling pressure. This is why OCT low might need more than a few trading sessions to hit some significant base. And we will not be surprised if OCT low actually stretches till the last week of OCT and maybe further. This case seems more obvious, as bottoms don’t generally witness ‘V’ shaped recovery. So even if we see a bounce, a retest and multi week stagnation can not be ruled out before the sustained upmove starts.
The only positives now left in our DOW 30 tracker are BAC (Bank of America), KRAFT FOODS, MAC and WALMART. We have new change of RECO from positive to negative on COCA COLA, PFIZER, P&G and J&J, all of which cracked last week. Rest of the DOW’s 12 stocks made most of the last week’s panic, when DOW crashed back to 2002 and 1998 decade lows. We are not out of the woods yet. The bust vibrations may take a while before we get our proverbial respite. Meanwhile get ready for the new version of MICROSOFT FLOORS.
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