Bill,
Here's a market letter you might enjoy?
Right now this part of it is still free.
There model has been fairly accurate accompanied by readable and sensible commentary.
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Subj: Walker Market Letter 1/18/2000
Date: 1/18/2000 2:08:28 AM Eastern Standard Time
From: jeff@lowrisk.com
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W a l k e r M a r k e t L e t t e r
1 / 18 / 2000
<http://www.lowrisk.com>
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This newsletter is completely free. Please tell your friends and associates about it. Better yet, forward the newsletter to them. There are subscription instructions for them at the bottom of this newsletter.
// -- MODEL UPDATE -- //
Lowrisk Market Allocation Model signal strength = 5
(on a scale of 0-20, with 20 being the most bullish)
***
Graduated Strategy - 100% money markets, 0% stocks 12/20/99
Timing Strategy - 100% money markets, 0% stocks 11/2/99
SuperBear Strategy - 100% in money markets 12/14/98
Disaster Avoidance Strategy - 100% in stocks as of 11/2/99
------------------------------------------------------
The market has had a couple of rock and roll weeks to start the year. The first and second weeks of the year traced out similar patterns, with a sell off early in the week followed by a rally back late in the week. After all the swings, the SP500 is down 0.28%, and the Nasdaq Composite is lower by 0.12%. These very slight changes don't begin to reflect the volatility we have already seen this year. The first week of the year, the Nasdaq Composite dropped more
than 11%. That selloff was followed by a 9.7% rally, then another drop of 5.8%, and finally another rally of 6%. That is a lot of volatility for a two week stretch. While the swings in the SP500 and Dow have been somewhat smaller, they are also coming at a dizzying pace.
Well, guess what...we don't think the swings are going to slow down anytime soon. Our posture from earlier this month has not changed. Until we are proven wrong, we think the market is in the process of putting in an intermediate term top. With the momentum the market developed in the fourth quarter of 1999, the market will not turn on a dime...it will take some time for a top to develop. That is what we think we have been seeing in the last couple of weeks.
So given that intermediate term outlook, we think the next big move will be down. The market is approaching its all time highs on the SP500, the Nasdaq Composite, and the Russell 2000. Those all time highs should provide some pretty stiff resistance, and a turn down would set up a double top formation. At the same time that the market is approaching that overhead resistance, we see numerous bearish divergences in our internals indicators. In other words, pretty much all of our indicators are at lower readings than the last time the market was up at these price levels. These bearish internal divergences are very reliable indicators, although they sometimes stretch out for a couple of weeks before the hammer drops on the market.
Another trouble spot for the market is interest rates, which keep on rising. The 30 year T-bond rate is now at its highest level since July, 1997. While it has become fashionable as of late to ignore rising interest rates, we still think that higher rates are bad for stocks. It is just a matter of time until the stock market takes note of the increasing rates.
In addition, our sentiment measures are showing quite a bit of complacency and an awful lot of bullish enthusiasm. This is somewhat surprising given the recent market gyrations, and we take it as another warning sign for the bulls.
So all in all, we are feeling pretty bearish here. We think the risk to reward ratio is heavily stacked against the bulls right now. Our model has us pretty much on the sidelines, a stance which lines up well with our bearish outlook. We could be wrong of course, and if so we suspect our model will move quickly back into the market...our
Signal Strength actually looks like it could increase on a rally here with strong market internals. Right now, we don't think that will happen soon.
When we *do* get our next signal, our Walker MarketEdge subscribers will get an immediate Flash Update in time to act on the signal. Your free subscription to the Walker Market Letter does not include these Flash Updates (or the extra bonus issues OR the mutual fund coverage) that our MarketEdge subscribers get. You can get all our extra issues, including the Flash Updates, by subscribing to the Walker MarketEdge. Our secure online subscription form is fast and easy to use.
Subscribe today at:
<http://lowrisk.com/marketedge-sub.html
NEXT ISSUE: the week of February 1st
Good luck,
Jeff
Copyright (c) 2000 by Jeff Walker, Lakewood, CO
Disclaimer:
The financial markets are risky. Investing is risky. Past
performance does not guarantee future performance. The
foregoing has been prepared solely for informational
purposes and is not a solicitation, or an offer to buy or
sell any security. Opinions are based on historical
research and data believed reliable, but there is no
guarantee that future results will be profitable.
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