Agreed.
I've been traversing Barron's this weekend myself.
Saw the Amzn article and heard about it from Bob Brinker show.
Brinker has had very good calls this year. Called this Bear Market Rally in the QQQ's on 5-24. Thinks qqq can possibly hit 100's before rally is over. Right now, he is looking for mid-July, maybe, maybe August.
Listening to him now. A caller asked about financials when bear market is over. His answer was that he thinks the bear market will last at least thru next year and possibly into 2002. He thinks we will not see the bottom this year. No recession this year. Looking for possible recession next year.
Found this in Barron's -
June 21, 2000
Getting Technical
Murphy's Mid-Month Update -- June
2000
By JOHN MURPHY
One way to determine the market's outlook for the economy is to
track the progress of cyclical stocks. That's why the relatively
poor performance of those stocks suggests that six Federal
Reserve interest-rate hikes since last summer are finally cooling off
the economy. Since last July (when the Fed started tightening), the
Morgan Stanley Cyclical Index (CYC) has fallen more than 20%.
1
The best way to measure that relatively poor
performance is to plot a ratio of cyclicals divided by the S&P 500.
Chart 1 shows that relative strength ratio peaking in the spring of
last year, and falling to a new low this week. The implied message:
The market expects the economic climate to get even worse.
Chart 1
One of the main factors contributing to the economic slowdown
has been a tripling of crude oil prices over the past year. While
that has hurt cyclicals, it's been good for oil stocks. Since the start
of this year, the AMEX Oil Index (XOI) has gained 30% -- far
outpacing the rest of the market. Although this week's OPEC
meeting may determine the short-term direction of crude prices, oil
stocks are at a critical juncture of their own.
Chart 2 shows the XOI testing major resistance near 550. OPEC
may decide whether the index surmounts that formidable barrier or
stalls there. The short-term direction of oil also may have some
bearing on the direction of interest rates (and the Fed's concerns
about inflation). [After today's OPEC announcement of
production increases, August crude oil prices gained 72 cents to hit
a new closing high. Oil stocks rallied as well.
Chart 2
Our last update called for the Nasdaq Composite index to reach
overhead resistance near 4000. (See "Murphy's Mid-Month
Update -- May 20002," May 24). The Nasdaq has done that and
more. A 50-point gain Wednesday pushed the Nasdaq 4064 - the
highest level since April 11. The Nasdaq has now recovered
almost half of its spring losses.
A strong AMEX Biotech Index (BTK) has kept firm bid under the
Nasdaq and the small-cap Russell 2000, and both indexes have
shown better relative performance over the past two weeks. (On
Wednesday, the AMEX Biotech Index gained 2%, and has
recovered more than two-thirds of its spring losses. That helped
push the Russell 2000 through its May peak to a two-month high.)
Leadership is coming from semiconductor stocks as well. In
Tuesday's trading, the Philadelphia Stock Exchange
Semiconductor (SOX) Index hit its highest level in three months,
making it the day's top performer (see Chart 3).
Chart 3
It's reasonable to expect that index to reach its March peak near
1400. One of the main attractions of the chip sector is its relatively
strong performance. That, in turn, is probably attracting
momentum players.
Two key factors are most likely to influence the market's direction
for the rest of June: how oil prices react to the OPEC meeting and
what the Fed does next week. The market may continue its
relatively trendless pattern until both issues have been resolved.
The market's dilemma comes from the reality that a slowing
economy may help bring interest rates down (which is good), but
at the same time hurt earnings (which is bad).
Seasonal influences should continue to support a positive bias-at
least into July. The longer-term technical pattern, however, isn't
very encouraging after the anticipated summer rally has run its
course.
John Murphy is the author of several books on technical analysis -- most recently
Technical Analysis of the Financial Markets -- and is president of MURPHYMORRIS, Inc.
His commentary is also available at murphymorris.com3.
URL for this Article:
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Hyperlinks in this Article:
(1)
interactive.wsj.com
(2)
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(3) murphymorris.com
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