"Shepler Capital Management: Weekly Outlook for 10/11 - 10/15/99
[Editors Note: Bill Shepler's weekly report was written about Noon EDT, with the SPX below 1330. We're pleased to report that the market is still obeying Bill's directives]
UPTREND INTACT
In last week's commentary we stated:
"...we do feel that the conditions are ripe for a very
strong snapback rally in the month of October, with the
possibility for new highs by November a very real one in
our estimation... Our initial upside target for this rally
is 1330 SPX. A rally above that level should then target
1380-1400 SPX. The 1259.29 SPX low is now critical support
for the bullish case, and we will place our stop for all
long positions at this level."
The market showed continued signs of improvement this week,
further bolstering our forecast of the 9/28 intraday low as
an important one, quite possibly the low point for the
remainder of this year. Volume, breadth, and new highs vs.
new lows all strengthened nicely this week, with the
McClellan Oscillator holding above the zero line.
The overall tone of the market is also much improved with
orderly contained selling, and signs of institutional
buyers re-entering the market for the first time since the
July high.
Also encouraging was the nice bounce back after the
"unexpected" news of the Fed's tightening bias on Tuesday.
The reason we place the word unexpected in quotes is that
the Fed funds futures showed absolutely no change in the
odds of a November tightening after the announcement, but
had been increasing those odds in the days leading up to
the announcement. So obviously the Fed funds futures
traders were NOT surprised by the announcement.
This was just another chance for the stock market manipulators to
shakeout weak handed longs that panicked on the ensuing
spike lower, which was then promptly recovered prior to the
closing bell.
So, what to expect now?
We feel that the market completed
the corrective downtrend from the July highs on Tuesday of
last week, and that we are now in the midst of a multi-week
uptrend that quite possibly will take the market to new
highs. We don't want to get too far ahead of ourselves with
lofty predictions of Dow 12,500 and SPX 1580 just yet, but
those are feasible upside targets if the previous highs are
taken out.
Right now we want to emphasize that we are going
to let the trend be our friend and ride this upleg until we
see signs of exhaustion of buying power, ie. volume drying
up.
In the meantime we will look for a high of some sort at
our next turning point on 10/19 +/- 3 trading days.
Based on our reading the the tape, the position of the cycles,
e-week seasonality, and current sentiment (ie. "the wall of
worry") we feel that the market could see an explosive move
higher next week.
In conclusion we remain solidly bullish here, but will
ratchet our sell stop up to 1285 SPX to protect recent
gains.
Watch the 1330-35 SPX area closely, as a breakout
above this level should light the fuse for a rocket ride to
1380-1400 SPX in short order."
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