S&P-Arnie Kaufman's "Encouraging Sign" + Paul Cherney
Arnie Kaufman: "Encouraging Signs"
businessweek.com
Paul Cherney: "Waiting for Cisco"
businessweek.com
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Rearranged for emphasis & ease of reading.
>>>Kaufman is editor of Standard & Poor's weekly investing newsletter, The Outlook.
FEBRUARY 5, 2001
THE OUTLOOK • From S&P
By Arnie Kaufman
Encouraging Signs
It seems the negatives are already factored into stock prices. Stay with a bullish policy.
Economic transitions are bound to produce contradictory data and investor jitters.
We are encouraged, though, that sell-offs are meeting support before they can gather momentum. This suggests to us that the negatives are already factored into stock prices.
In addition, we expect the Fed to lower rates a good deal further, and an accommodative Fed is generally a major market plus.
S&P economist David Wyss believes that, with the help of an additional half- to full-percentage point cut in the fed funds rate, the economy will skirt a recession.
While looking for little GDP growth in the first half and worried that corporate profits may come in below current expectations, Wyss points out that the market tends to anticipate improvement in the economy by an average of four to six months.
He feels, therefore, that the present is a good time to be accumulating stocks.
Potential fuel for an advance exists in the substantial cash on the sidelines.
And three months remain to the November-April period, in which stocks historically have scored most of their gains.
On Nasdaq, the index that is key to the market's health, price and volume movements lately have been favorable, according to S&P technical analyst Mark Arbeter.
When Nasdaq slips, trading falls off, but when the index rises, volume expands, a sign of accumulation.
Arbeter believes Nasdaq, now 2660, is headed for a test of the 3000 level, where the charts suggest heavy resistance will arise.
A pattern of ascending peaks and troughs on both Nasdaq and the S&P 500 is emerging.
... If the trend develops further, it will indicate that selling into rallies is no longer a profitable strategy.
We advise keeping stocks at 65% of portfolios.<<<
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>>>FEBRUARY 5, 2001
CHERNEY ON THE MARKETS • From S&P
By Paul Cherney
Waiting for Cisco
While investors are cautious, they are not rushing to the exits. There's a good chance of an up close Tuesday .
Investors are on a psychological seesaw right now.
The earnings front remains a dark cloud casting a shadow on the market, but the Fed's easing posture neutralizes the earnings concerns (the Fed wouldn't be lowering rates if everything looked rosy).
There is an air of caution for many tech investors as they await Cisco's (CSCO ) earnings report and guidance due after the close on Tuesday (2/6), but the market had ample opportunity to head lower in Monday's session and the sellers didn't get panicked into parting with their shares.
There is a good chance that Tuesday could postive closes for the Nasdaq and the S&P 500.
The Nasdaq is testing immediate support in the 2644-2576.95 area.
Unless there is a headline of undeniably bearish importance, I think this area will hold for Tuesday and any dip in prices into the 2630-2614 area should find buyers ready to move in.
The next layer of support for the Nasdaq (which was briefly tested in Monday's session) is 2604-2576.
Immediate Nasdaq resistance is 2686-2743.
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The S&P 500 is testing a focus of resistance in the 1353-1368 area.
The index has broad and substantial resistance 1351-1389. The index has support in the 1350-1342 then 1335-1325.
Here is a worst case scenario for the next couple of trade days (I doubt a break of 2576 will unfold.)
The Nasdaq's low print on 1/16/01 was 2576.95 and prints in this area (if they occur) should bring buyers to the market and reverse prices for a rebound BUT, if 2576 breaks, downside risk opens for prints below 2520.
Cherney is market analyst for Standard & Poor's <<< |
