Got Memory? Ten Reasons to Breath Easier
15-Sep-98 09:00 ET
Dow Jones Utility Average surged more than 5 points higher on Monday and is now within 3% of its all-time high... General market doesn't collapse when DJUA is performing well.
Moving over to the more badly beaten down transports, note Monday's huge gain recorded by the Dow Jones Transportation Average... Airline stocks pacing rebound as Northwest settles its strike and fears of a global economic slowdown wane... Technical tone still ugly but given depths of recent decline expect near-term bias in DJTA to remain positive... Key resistance is at 3100... Stable to bullish bias in this index will take downward pressure off broader market.
More and more, investors looking for Fed to ease rates... Briefing recently made argument for "insurance" easing... Remember, it never pays to fight the Fed.
Earnings... Analyst tripping over themselves in recent weeks to lower estimates for S&P 500... Not long ago, street was looking for Q3 gain of between 5%-7%... Now consensus estimate is for gain of closer to 2%... With estimate so low, Briefing contends that market more likely to surprise to upside than downside once numbers start rolling in... In the earnings game, actual numbers less important than expectations/perceptions - at least over short-term.
Financials rebounding... Okay it's early, but gains over past couple of sessions encouraging... Group needs to start participating on the upside if market is to sustain an advance... Though uncertain global economic climate will continue to weigh on sector, discounted valuations, oversold technicals and favorable rate backdrop suggest that near-term bias will remain positive.
Leadership... Extension of #4... Key leadership groups - financials, techs, drugs, transports, back on track.
Internal dynamics improving - albeit ever so slightly... Volume, new highs/new lows, advance/decline ratio all pointing to continued gains over short- to intermediate-term.
Still best game in town... Asia remains a mess; Russia's economic collapse putting into question European recovery; and Latin America is back under the gun... US market might have lost aura of invincibility, but it sure looks good relative to rest of world.
Money on the sidelines... One impact of market sell-off is that money managers have raised cash levels... At first sign that gains are more than one- or two-day event, look for money to come off the sidelines fast as they won't want to miss out on next big up move.
Short-covering... Once market starts to gain momentum to upside, shorts will be forced to cover adding fuel to recovery... Short-covering related gains will draw more fence-sitters off sidelines and next thing you know sell-off is nothing but a nasty memory.
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