Here is somebody (Roy Blumburg) who called the bottom perfectly. And energy service is among his favorite groups.
Roy M. Blumberg
Stock market bottom is close
By Roy M. Blumberg, CBS MarketWatch
Last Update: 12:47 PM ET Oct 25, 1999
Commentary
Join the discussion
NEW YORK (CBS.MW) -- In January of this year, I suggested that the stock market was
approaching an intermediate top. See column.
At the time, I was expecting the major averages (Dow Jones
Industrial ($INDU: news, msgs), S&P 500 ($SPX: news,
msgs), and Nasdaq Composite ($COMPQ: news, msgs)) to
make a least one more new high, before a correction of 7-15
percent developed.
It turned out that my forecast was a little premature for the
averages, but not for most stocks. The New York Stock
Exchange Advance-Decline Line actually reached its highest level
for the year on Jan. 6, and has been in steady decline since.
This implies that the vast majority of stocks have been declining since January. Although the
number of daily new highs on the New York Stock Exchange peaked in April.
By the time the S&P 500 peaked in July and the Dow Jones Industrial peaked in September,
most stocks had been declining for months. Few investors realized that the market was in a
correction until October.
Signs of bottom are becoming clear
Just as there were many signs of a top in the market months before the averages peaked, there
are many signs that an intermediate bottom is in the process of being formed. Bottoms usually
take much less time to form than tops. This suggests that the decline should be completed
before year end, and that the ultimate low should not be more than a few percent below the
10,000 level on the Dow Jones Industrials.
The weight of the evidence
There are a number of positive technical and psychological
factors, that have developed over the last few weeks. First, the
percentage of stock trading above their 10-and 30-week averages
has reached an intermediate oversold reading.
The number of stocks reaching daily and weekly new lows has
increased to levels associated with intermediate bottoms in bull
markets. Last week, there were 500 daily new lows on
Wednesday and nearly 900 weekly new lows on Friday.
Indicators of investor sentiment are also flashing positive signs.
The number of bullish investment advisors now are just about
equal to the number of bearish advisors. This event usually
develops near the bottom of bull market corrections.
Another test of the low
It is possible that the low for the major averages was made last
week. However, few bottoms are made that do not see the first
low tested at least once. This would suggest that stocks could be
in for some wild swings in the next few weeks.
Best sectors to buy
Usually the groups that hold up the best during a decline are the leaders for the next rally. This
would suggest that investors look to buy stocks in the following groups: Semiconductors &
Equipment, Software, Internet, Gaming, and Energy services. My favorite stocks in those
areas are Applied Materials (AMAT: news, msgs), Texas Instruments (TXN: news, msgs),
Sun Microsystems (SUNW: news, msgs), CMGI (CMGI: news, msgs), MGM Grand
(MGG: news, msgs), Nabors Industries (NBR: news, msgs) and Baker Hughes (BHI: news,
msgs). One group that was not a leader over the last six months that I like is Pharmaceutical,
with Pfizer (PFE: news, msgs) and Merck (MRK: news, msgs) being my favorites.
Roy M. Blumberg, a vice president of Sheer Asset Management in New York, is a
columnist for CBS MarketWatch.
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