Dow Jones 9282.69 -97.55 12:39 pm PST, September 30, 2003  NASDAQ 1791.73 -32.83 For info, visit access.smallcapnetwork.com S & P 500 996.88 -9.71 To be removed, please click here Russell 2000 491.01 -1.70 VOLUME 03: ISSUE 59  Selling Intel, VIX'ing the Market and Selectica. September lived up to its reputation of being a tough month in the market. Just look at Intel (NASDAQ: INTC) which seems to be unable to get out of its own way--or the analysts' for that matter. A few weeks ago we mused how the analysts and by extension, the market, were almost singular in their myopic viewing of the tech sector as wholly represented by Intel. Probably the most covered stock on the board, the shares are applauded at almost every turn. Broker JP Morgan recently raised its rating on Intel from underweight--posted on December 13th when the shares were $15-- to neutral, Friday last. The fact that the shares have virtually doubled in the last few months must have been the driver that forced JPM to bump the shares from 'don't bother' to 'we'd better at least appear to be getting on the train'. Even though, at least for the foreseeable future, the train has left the station. What does underweight mean, anyway? Or neutral, for that matter?  Getting better, but really.... In 2000, INTC had revenue of $34 billion and per share earnings of $1.57. In 2002, those numbers dropped to $26 billion and 52 cents. In 2003, revenue should come in at around $28 billion, give or take, and earnings are forecast at 62 cents--hardly an outstanding recovery.  For those keeping score, INTC's projected earnings per share for 2004 is currently 81 cents. The shares are trading at around $28. Do the math. The shares are overvalued, or at least fully priced.  For those investors who desperately want to own Intel, a long-term buying opportunity will likely arise at the $23-$24 level in the next couple of months. Until there is significant clarity that revenues are growing, $30 will remain a wall. Sure, there are lots of reports of the improved and improving chip sector, but the easy money has already been made. The fundamentals have to catch up with the stock price, or the stock price has to decline. Wait for the latter. The Wall Street mean projected 12-month target for the shares--according to the good folks at First Call-- remains an uninspiring $32.50.  Buy some Lucent (NYSE: LU) instead. Or sell some INTC and buy some LU. More fun, better leverage and it's acting like a nifty small cap. Be informed that one of our editors has purchased 10,000 shares of Lucent in the open market at an avg. cost/share of $2.23. Our editor can buy or sell shares in this stock at his own discretion, therefore, this should be viewed as a potential conflict of interest. Told ya... See the CBOE Market Volatility Index (VIX) last week? Shot up 15 percent from 19 points to 22 points, and mirrored a vicious little turn in the market. Last week, the QQQ's (NASDAQ: QQQ) moved down from 34.50 to 32.50 in concert with the VIX decline.  I continue to be impressed with this indicator. Seems to be turning after almost hitting 23 midday, Monday. As you will recall, a rise in the VIX is usually indicative of market weakness as volatility increases. We've mentioned before that a breakout above 25 would suggest a negative market turn. While we're in the ballpark, I don't see the VIX punching through that 25 level in the near term, but we'll keep a weather eye on it. It's definitely one to pay attention to. All's quiet, but Selectica moving nicely. Haven't heard anything substantive on interactive selling systems concern, Selectica (NASDAQ: SLTC), profiled here at $4 a share September 12th. The shares popped up to $4.90, Monday and as you recall, we felt that a technical breakout above $4.75 could take the shares north of $6. Bounced off that level quickly to settle in the $4.70 level. Good company, management appears quite aggressive and there is around $4 per share cash in the kitty and no debt. Given that the shares have traded sideways for a couple of years, it may take several attempts before it surmounts that $4.75 level. Trade volumes are rising nicely as the shares move up. Some good corporate news would probably push this one higher, such as a new CEO or some juicy contract wins. We advised on September 12th to set a stop at $3.30. For those, like us, who use stops, that level can be raised to around $3.75-$4. Just to be safe.... Mea Culpa A factual error picked up by several readers in the Assure piece last week. Reader FS, and others, wrote: Good article on ASUR...Please note that the creation of Encana Corp (NYSE: ECA) was a merger between Alberta Energy & Pan Canadian Petroleum.. (in April  2002....ed..) ...and not formerly-- as I stated --Petro-Canada (NYSE: PCZ), which is still very much alive and well. Thanks for the catch. Also, if you happen to miss an edition--I've had mail on this--check out our site and archive at http://access.smallcapnetwork.com.  Seems some readers are unaware it's there. You can also change or amend your email address if delivery is missed. We publish twice a week, virtually every week. So come and see us and keep up.  And, get your friends and colleagues to sign up. SmallCapDigest is free, after all, and your information stays with us. Got comments, questions or suggestions? 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