Home
Up
Comm100199

Co-brand Partnerships

award-5.gif (6517 bytes)

topsite.gif (1668 bytes)

webfifty.gif (6027 bytes)


 
drop_center.gif (2753 bytes)


wpe1.jpg (2095 bytes)


FREE EMAIL
Email Login
Password
New Users Sign Up!
 
MAILING LIST
Sign up for our weekly e-mail newsletter!
Tell Me More!

Enter your e-mail address
subscribe
unsubscribe
NEWS SEARCH
WEB DIRECTORY
WEB SEARCH
 CITY GUIDES
search by:
 WEATHER

Current Weather
Enter Your City, State, or Zipcode:

   

MASTERING
THE TRADE

ORIGINAL, INTERACTIVE SEMINAR ON TRADING USING
TECHNICAL ANALYSIS
 

 
EARNINGS ESTIMATES

Enter Symbol

U.S. QUOTES

Enter Symbol:

U.S. CHARTS

Enter Symbol:

TECHNICAL OPINION

Enter Symbol:

CANADIAN CHARTS

Enter Symbol


 SEC FILINGS

Search For:
 

Company Name
Ticker Symbol

 BROKER RESEARCH
Exclusive Broker

Research
Enter Ticker

 

MORNING COMMENTS WEEK OF 9/20/99-9/24/99

 

9/24/99

Tech stocks overvalued!? Who would have thought it!?  Certainly not us, and certainly not the average investor, who according to the latest figures from AMG Data, continued to pour money into large cap growth and technology funds last week, while at the same time stampeding en masse out of small cap and international funds.

After down days like yesterday, someone inevitably poses the question, "Is the market near a bottom?"  If the AMG data and this morning's 2.2% rise in the CBOE Internet Index is any guide, the necessary conditions for a bottom are still a long, long way off.

The key word here is capitulation, the key place we need to see it is in the large cap growth and tech stocks, and the key group we need to see capitulate are the proverbial "last ones in".

Perhaps more frightening than yesterday's selloff is the the large amount of complacency that we still see among investors in certain segments of the market (large cap techs and Internets spring to mind here).  The euphoria of spring is waning in these sectors, but until we see a bit of fear, or should we say panic, develop, there is little hope of a bottom being put in place.

The primary danger in the market right now is not the Fed, nor is it yen/dollar, but rather it is the possibility that the pendulum of market sentiment will follow its well worn historic path--what overshoots on the upside, inevitably overshoots on the downside, before reaching its final destination of equilibrium.  Today's high level of margin debt makes the possibility of an overshoot on the downside all the more likely.

While capitulation is still a ways off, there are several support levels that the market must hold today if it is to slow its decline.  At the close, we would watch 10258 on the Dow Industrials, the 200 day moving average. A failure to hold this level would leave all of the major averages except NASDAQ in long term downtrends. On the S&P, a close below 1279 would confirm the bearish head and shoulders top that has been forming on the index, and would likely spark an intensified round of selling.

It is NASDAQ that bears the closest watching however, for we have a sneaking suspicion that not until it too has entered a long term downtrend will the current bout of selling subside, and current market divergences begin to narrow.  For today, the 2727 level (the 55 day moving average) stands as support.  Over the next few weeks, we wouldn't be surprised to see the 2500 level (the 200 day moving average) turn from support to resistance.

Over the next few days, watch the support levels on the major averages, and be thankful that Microsoft's Ballmer only questioned valuation levels-- we shudder to think what the reaction would have been had an e-commerce executive uttered the phrase, "Profits are a necessary prerequisite for earnings growth".

9/23/99

Throw away that financial newspaper, turn off that financial news network, and head into the kitchen for a quick primer on the present stock market, and bull markets in particular.  In preparation for the lesson, grab that bag of flour off the shelve, and rummage through the drawer for that common kitchen utensil: the funnel.

Now, rapidly pour all of the flour into the funnel, and observe.

Initially, as the flour is poured, the volume of flour passing into the funnel is great and all the specks of flour participate in the race to the funnel's other end.  As the great flour race to the end of the funnel nears its completion, the volume and quantity of flour specks making the final last yard dash tails off noticeably as the walls of the funnel narrow, until at the end only a few are left to participate in the move out of the funnel's far end.

The end of the funnel is similar to the end of a trend, in this case a bull market. The progressively narrower walls of the funnel may be thought of as representing the progressively smaller pool of new recruits (i.e. fresh money) that is available to be drawn into the race (prevailing trend) to support it.  At  the far end of the funnel ( the trend's final terminus) the narrowness of the walls (supply of new money, or participants, joining the trend) allows only a few to pass.  These few specks of flour that are able to pass through the funnel's end may be thought of as representing the narrow group of stocks that remain in rally mode at the end of a trend.

At present, the stock market is displaying all signs of having reached the proverbial end of the funnel, with only a narrow group of big cap tech and Internet stocks left standing to carry the trend to its final destination.

Rather than a cause for celebration, we viewed yesterday's 37 point surge in the NASDAQ amidst a general market decline as yet another warning bell being sounded that the risks in the U.S. stock market now far outweigh the rewards--a warning bell that trouble is now at hand.

The numbers to watch continue to be Dow 10400, and 1301 on the S&P 500, with this morning's selloff bringing those numbers within closer range.  The 99.1 support level on the U.S. Dollar Index continues to bear watching, although we expect a relative calm to prevail until Saturday's G7 meeting, at which point we would expect the pressure on the dollar to resume.

Finally, initial unemployment claims came in at a much lower than expected 272,000 this morning, a 25-year low.  Despite our oft stated views on the labor market, we are inclined to regard today's low number as a storm related aberration.  Absent the effects of Hurricane Floyd, we suspect the number would have come in closer to its previous 4-week average of 289,000-- a level which remains a concern, and a level which is likely to prompt Fed action before year end.

9/22/99

Blame yesterday's bloodbath on a failure to meet lofty expectations, attribute this morning's initial early minor bounce in the NASDAQ to an acceptance of lower expectations, a readjustment process that has become increasingly commonplace over the past few months.

The ability of stock market participants, tech stock investors in particular, to quickly adjust to a less hospitable environment, to pick up the pieces after complacency is blindsided, has been the one saving grace of this market--the one factor that has allowed the major averages to stay aloft while conditions were rapidly deteriorating around them, both in the broader market, and on the interest rate front.

The 6% yield on the long bond, feared just recently, has become accepted, and with its acceptance the pieces were put in place for the Dow and NASDAQ to hit their recent highs. The Internet stocks, once subject to steep selloffs at the mere mention of "6%", are now immune to this level, investors in them having quickly readjusted to a changed environment.

This ability to adapt may also be thought of as a raising of the pain threshold. It allows complacency to quickly regroup and stability to return to the marketplace, but it also introduces a dangerous level of blindness to the dangers that a changed environment brings. Although this readjustment process, this raising of the pain threshold, can continue for some time, ultimately a breaking point is reached as the ability to adapt to a changed set of circumstances is stretched to its limits.

While the market has not reached this breaking point yet, the boundaries are being stretched and tested, with Dow 10400 the key psychological level at which the market loses its ability to snap back from bad news. On a failure to hold this important support level, we would expect an initial period of intensified selling that could quickly push the Dow down to 10000, a level at which we would expect it to temporarily stabilize.

While the Dow and NASDAQ still retain the ability to make new runs at their old highs as long as the Dow remains above its key psychological support level, the rest of the market has long since lost any hope of revisiting its old highs.

The S&P 500 is teetering on the edge of joining the ranks of the hopeless. It has successfully held support at its 200 day moving average (1301) 3 times over the past 6 weeks, but each test of support has been less convincing, the breadth a bit narrower on each test, and the bearish head and shoulders chart pattern (a pattern that would be confirmed by a fall below 1279) that is forming a bit more ominous on each test .

The increasing divergence between the dynamic duo of Dow/NASDAQ and the rest of the market spells trouble, but that trouble is likely to be greatest for the Dow and NASDAQ as the two averages play a game of catch-up to the rest of the market. Divergences can persist for some time, as the divergence between the Advance/Decline line and the major averages has, but eventually a breaking point occurs here too, and this time around we suspect it will be the tiny minority of stocks that have led the market which will be the ones that suffer the greatest damage.

Over the next few days Dow 10400 is the key level to watch, with 1301 on the S&P 500, and 99.1 on the U.S. Dollar Index close runners up.

9/21/99

Surprise, surprise, from east to west, it is a day of surprises.  In the east, the Bank of Japan voted to maintain the status quo...meanwhile, on the other side of the world, German businessmen are grinning more than expected as they contemplate the prospects for the German economy...and in the middle of it all is the dollar, which as expected has turned south once again, with the U.S. Dollar Index December futures plummeting to 99.11.

The greenback's woes began overnight when the Bank of Japan  decided that there was no better time than the present to thumb their noses at their rivals over at the Ministry of Finance by voting not to increase the money supply. The move all but kills off any hopes of an organized currency intervention by G7 members at their upcoming meeting on Saturday, and spells trouble for the U.S. Dollar and Japanese exporters.

While the BOJ's decision to let market forces take their course is a negative for the U.S. dollar and the Japanese economy, the move is beneficial in the short term for South Korean exporters, and perhaps more importantly it temporarily decreases the risk of a destabilizing Chinese devaluation.  These short term positives will be quickly reversed however if the yen's phoenix-like rise continues, and short circuits Japan's nascent recovery from its decade of gloom.

The yen's sharp spike this morning was but the first punch thrown in today's assault on the dollar.  The second blow was struck shortly after the BOJ's decision when a report on German business confidence came in at a much stronger than expected reading of 95.3, sending the euro higher against the dollar, and once again touching off the on-again off-again fears that an interest rate hike by the ECB will occur sooner rather than later.

The third "surprise" blow struck to the dollar this morning is one that likely caught the attention of even the Federal Reserve, and it is perhaps here that investors who have grown complacent in the belief that the Fed's work is done should start to worry.

That third blow to the dollar was struck by a figure that, while not possessing the press-grabbing allure of a streaking tech stock or profitless e-commerce dotcom, has been quietly setting records all year.  Perhaps if the Commerce Department renamed it TradeDeficit.com, it too would receive the attention it deserves.

The trade deficit soared to $25.18 billion in July, and is now on pace to eclipse 1998's record $90 billion gap by nearly 50%.  A strong 0.5% pickup in exports headed to the recovering economies of the world proved to be no match for the appetite of the U.S. consumer, who fueled a 1% rise in imports, snapping up consumer goods, autos, and lumber left and right.

The report was yet another in a string of recent reports that have shown that U.S. consumer spending has yet to be slowed by this year's rise in interest rates. As last Friday's University of Michigan consumer sentiment survey showed, higher rates have also failed to dim consumer's expectations for the future, with the future expectations component of the survey rising to 100.8 in September from the prior month's 98.4.  With the economy's main driver, consumer spending by an increasingly confident consumer, remaining undaunted by two Fed moves, the odds are growing stronger that interest rates will have to rise far further than expected before their rise begins to slow the economy (and the consumer) down.

In the past few days, we have read and heard many comments by market pundits who believe that strong e-commerce spending during the upcoming Christmas shopping season will be the fuel that ignites a stock market rally this fall. Now we ask, isn't it just possible that instead of rescuing the stock market from its summer of uncertainty, the much anticipated holiday buying binge by consumers will be the bullet that delivers the fatal blow to the stock market?

9/20/99

Soothing words can do wonders to calm a bad case of the jitters. When the soothing is administered in doses of three, on three separate subjects who are prone to interact, the ability of words to calm the frayed nerve is heightened.

The markets: bond, stock, and dollar,  enter the week feeling a sense of relief and just perhaps a new found hope for the future, a hope that the darkest hour has passed, a hope made possible after a trio of disparate voices arrived to lift spirits just when the storm clouds were beginning to gather.

The first voice, that of a market guru, spoke of a market fairly valued, of great potential and brighter days ahead, of higher targets to be met.  The market savant's sunny outlook for the U.S. market, an outlook in stark contrast to those voiced recently by such widely dispersed bodies as the IMF, the Federal Reserve, members of the Bank of England, and a noted Nobel Prize winning economist, helped to buoy recently dampened spirits.

Now, while we would never think to quibble over the little details concerning this New Era model of valuing stocks,  a method that differs wildly from the previously accepted valuation methods which as a whole indicate the market is 35%-50% overvalued, questions still do remain.

Among those questions dancing before us are the ones we normally ask when evaluating any sort of black box system, be it a new trading system or a new method to discern fair value for the stock market: has the model's accuracy been tested on historical data, or have the formulas for the model merely been constructed in such a way as to validate a belief held by the builder of the system, whether that belief is right or wrong.

 Now, while we would never think that a new valuation method would be brought to the public's attention solely for the purpose of influencing sentiment and in the process furthering the aims of an individual or firm, we do wonder: what if this new era model is wrong, and all those rusty models used by central banks, the IMF, and Nobel Prize winners are still valid in their methodology. What if.

Watching NASDAQ's ascent to the heavens on Friday, we were tempted to embrace this new valuation model, to start whistling a tune of "old models are no longer valid in this new age of technological revolution".  We were tempted to say the economic cycle has been broken and the market can continue to register 25%+ gains far into the future, but a little voice kept saying "you need a bull market to achieve 25% gains, and save for a handful of issues, the bull market ended long ago".

After waging an internal battle all day, we finally had to admit that perhaps that little voice was right, perhaps with 53.7% of stocks in long term downtrends and 63.9% in intermediate term downtrends, now was not the time to entertain thoughts of perpetual historically outsized returns--perhaps, with the bull market's continued existence but a mere figment of the imagination, now was the time to move onto more hospitable shores, or to even entertain thoughts of a concept long forgotten amidst the excitement of the past few years: preservation of capital.

We said there were three voices that helped shake the markets out of their numbing case of the jitters late last week.  The other two voices belonged to a newspaper scribe from Washington and a Japanese government official, the recipients of their calming words: the bond market and the dollar, respectively.

The newspaper scribe's prediction of no rate hike at the October meeting may yet prove to be right, but the expectation in some segments of the market that "no rate hike" equates to "no further action" is likely to cause problems for a market that is already looking the worse for the wear after 4 months of uncertainty.  While we rate the odds of an October hike at 50/50 at this point, we rate the chances of No Rate Hike/No Change in Bias in October at 0%.

If last week's economic data is any guide, data which showed both the consumer's confidence and his spending spree gaining strength, further hikes are around the bend.

The third voice, a voice that caused a reversal of the dollar's recent slide against the yen, we will discuss in more detail tomorrow, a day when the release of the latest trade figures are likely to reverse the dollar's gains.    

 

DISCLAIMER

 

 
Search for it at the TulipSearch Open Directory
Investment Bookstore Investment Newsstand Market Mavens Report

TULIPS AND BEARS NETWORK SITES

 

FINANCE
Tulips and Bears
Contrarian Investing.com
Internet Stock Talk
Traders Message Boards
Traders Press Bookstore

NEWS AND INFORMATION
TulipsWeather
Freewarestop.com
TulipsMail
TulipsEspa�ol
TulipSearch
TulipNews
TulipCards
AllMusicSearch.com
City Guides
Travel Center
Bargain Bloodhound

WEBMASTER TOOLS

BecomeAnAffiliate.com
TulipDomains
GoSurfTo
TulipStats
TulipHost...coming soon
TulipTools...coming soon
...coming soon




Questions or Comments? Contact Us

Copyright � 1998-2002 Tulips and Bears LLC.
All Rights Reserved.  Republication of this material,
including posting to message boards or news groups,
without the prior written consent of Tulips and Bears LLC
is strictly prohibited.  'Tulips and Bears' is a registered trademark of Tulips and Bears LLC


Last modified: April 02, 2001

Published By Tulips and Bears LLC