Shepler Capital Management: Weekly Report 12/20/99 - 12/24/99
Millenial Madness!
In last week's commentary we stated:
"...our trading systems... (remain) on a sell signal. The
wild intraday volatility and consistently negative NYSE
TICK readings this week confirm our position that a top for
this rally is very near if not already seen, and that
professionals are busily distributing shares to the
gullible public... This rally off the 10/19/99 lows is
displaying probably the most lopsided and dangerously
divergent internals that we have EVER witnessed... Our next
cycle turning point date is 12/21 +/- 3 trading days...
This turning point is projected to be a high..."
The stock market definitely has a case of Millenial madness,
and the NASDAQ market is nothing short of stark raving
insane.
The NASDAQ is up 70+% on the year and up more than
150% since the 10/98 lows, and now sporting a collective
P/E ratio north of 175! This makes the 1989 Nikkei and 1929
US stock market bubbles look like orderly rational markets
by comparison. And, just what is the justification for such
valuations? To listen to the talking heads it is:
1) Liquidity (the Fed is again wrongheadedly printing money
like crazy in fear of Y2K panic, just like they did last
year in fear of an LCTM induced meltdown.)
2) Momentum (money managers are displaying herd mentality,
not wanting to under perform their peers as they all
stampede recklessly into the hot tech stocks. The emotion
of greed is so powerful that it becomes a fear of selling
too soon, and a panic to buy for those that were late to
the party.)
The problem with both of these justifications are that they
are both transitory factors that are temporarily
superseding rational analysis. For one, the Fed will begin
sopping up all that liquidity once Jan. 1, 2000 comes and
goes, and that will not be very good medicine for this sick
bull. Secondly, the momentum game is very dangerous since
momentum can and usually does reverse even more violently
than it went up, and, contrary to popular opinion, CNBC
('Bubblevision' to quote Bill Fleckenstein) won't be
ringing any bells at the top.
So, where does that leave us? Well, our money is definitely
on the short side. Our intermediate-term system remains on
a sell signal. Our 12/21 +/- 3 trading day turning point
high timeframe arrived on Thursday. Fundamentals are
astoundingly bearish, with bond yields climbing ever
higher, and stock valuations deep into the realm where only
tulip bulbs and beanie babies dare tread. Technicals
continue their downward spiral with the A/D line hitting
multi-year lows day after day as the blue-chips hit new
highs.
And, Friday saw the Dow finally join in with a new
intraday high of its own, completing the necessary
ingredients for Elliot wave completion of this rally off
the 10/19/99 lows.
We are now fully out of all long positions and are
aggressively short this market, particularly the NASDAQ
issues.
Last but not least, Happy Holidays from Shepler Capital
Management and Urbansurvival.com.
(c) 1999. Bill Shepler - You can write to Bill at wshepler@yahoo.com |
