Whoooosh! What will Wednesday bring? Lower prices, most likely, if Microsoft is any kind of bellwether. We were waiting for the stock to dive yesterday to a Hidden Pivot support at 26.84 that had been flagged in the intraday notes section of Rick's Picks. For a while, as someone in the chat room observed, Microsoft looked like the turd that wouldn't flush. It finally did, though, and by day's end the company's shares had traded as low as 26.71. The fact that MSFT overshot its downside target by 13 cents may not sound significant, but in Hidden Pivot terms it was, for two reasons. In the first place, while the target was sufficiently compelling to have caused us to expect a bounce, however feeble, from 26.84, there was none. Second, with its lock-hold on the world's PC software market, and a war chest overflowing with tens of billions of surplus dollars, MSFT is most often a stock that must be dragged kicking and screaming to bring it down each tiny step of the way. (Click on chart to enlarge) Granted, it's easy to hate the company and all of the mediocre products it sells, especially the many it has copied so poorly from competitors. But that doesn't necessarily make MSFT a great short, or even a good one. We train our crosshairs on Microsoft, not because we are bear hunters intent on squeezing off a shot, but to adjust our sights. This we did after yesterday's close, and after ruminating on the price action at 26.84, we inferred that the stock market as a whole may have troubles that go far deeper than yesterday's headline plunge. So what may lie immediately ahead? When stocks begin to trade this morning, it would appear that Microsoft can only go down, having exhausted the
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