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Elaine bases her calls strictly on math -- she uses a number of
indicators such as interest rates, p/e ratios, etc. She came up with
her own blend of these indicators some time back and strictly follows
them. When they give her a "sell" signal, she says "sell". Trouble
is, although these indicators may have been accurate from a historical
perspective, they may or may not be a good guide to future market
moves because the nature of the market changes as our economy changes,
technologies change, and so forth. For instance, the DJ trans-
portation index used to be a stronger indicator of future corp.
profits back when we were a more industrial economy, and most every-
thing of value was shipped. Now, of course, a lot of value resides
in information in our present economy and these things don't require
trains, planes, and ships. So the DJ transports won't predict the
future of the general markets the same way they once did. The point
is, everyone belittles market observers when they claim "this time is
different", but in truth, this time, and every time, is a little
different. This is not to say the market will never decline -- it
will, some day -- and we will have another bear market period. And,
if Elaine continues to call a bear market, she will eventually be
correct. That said, if we do go back to 5100 or even below 5000, I
believe that would be one of the great buying opportunites of all
time. A 12 - 18 month bear taking even 20 -30%off the averages is
quite possible for '97 / '98, but that would be the start of a new
leg up that would take the Dow to 10,000 in the next bull cycle.
That's why dollar-cost-averaging is such a great tool (use your 401K
or mutual funds) and maybe put a little extra in cash aside each
month to be ready to buy buy buy when all the fools are selling
in panic. (I'm a long-term investor, you day-traders will have to
work harder and short on the way down if you've got the guts.)
Sorry for being so long-winded. Goodnight and good luck to all
with your investments. |
