Tech's leadership turns to laggardship on Cisco's perceived downgrade to the technology sector. John Chamber's comments concerning the forward-looking revenue numbers were not quite what we are reading in today's headlines. He stated there was a slowing in one line of business, which would predominately be the financial services sector.

That would be expected in light of what is happening there. However, the selling today was more severe than the comment warranted - our view. This smells of investors looking for a reason to sell, not just Cisco, but also the entire technology sector. Profit-taking could be part of the motivation with the solid move higher since July. We would take the stance it is a bit overdone (4.1%) today. The chart below of the Dow Jones Technology index shows the damage from the selling technically. 

We broke the short term trendline. The 50-day moving average was broken intraday. The break of support short term was on heavy volume as well. This would lead us to believe the selling is overdone short term as reaction to a news event of one stock than the entire sector being bad fundamentally.

 We would look for a bounce back above the 650 mark, and some consolidation, as investors work out fear and/or the profit taking is done. Technology was the one sector, outside of energy, where investors felt ‘safe' from the subprime/credit issues in the financial sector. The comments from Chambers changed that view, and the panic set in. Cisco broke below the $30 support mark as the stock sold off almost 10% on the day. The move broke the uptrend, which started off the lows in May.

From our view, we would be looking for an opportunity to buy versus sell at this point. If you review the earnings data and the forward-looking comments, there is plenty of good news versus the bad interpreted from the sellers.