Tradeable Rally Before Next Decline ?
Feb 25, 2001 (JAGfn.com via COMTEX) -- February 26-March 2, 2001 Given the
ground covered, and miraculously recovered, last week's four days of trading
condensed what once would have been weeks or months of trading.
Friday's
turnaround was largely attributed to comments from Bear Stearns Economist and
former Fed Governor, Wayne Angell, who told his brokers he assigned a 60%
probability of a half point intermeeting cut as early this week.. I find the
prediction hysterical on two points:
First, though I'm well aware Consumer
Confidence will be released on Tuesday, and consumer spending represents 69% of
GDP, Alan Greenspan is supposed to present, to the House of Representatives,
part II of his semi-annual report on the State of the Economy, on Wednesday
(Formerly his Humphrey-Hawkins address.) Given the power of Greenspan's words,
he can rally the markets by talking the talk without actually walking the walk.
The second reason I had to laugh has to do with the predictor, himself. As long
time readers might remember from an earlier
"That's Entertainment," Wayne Angell
and Bear Stearns were sued by a Canadian investor who suffered steep losses in
some $140M in bond positions initiated as a result of advice offered by Mr.
Angell and Bear Stearns. In the course of last fall's trial, none other than Ace
Greenberg, the top dog at Bear, testified on behalf of Mr. Angell and the firm
by saying that "economists are right only 30% of the time." Further, in defense
of the advice given and the decisions made by the Canadian, Mr. Greenberg said
'forecasts by economists should be taken as nothing more than"Entertainment."
* hehe ;-)
While others have said it was John Ryding not Angell who made the comments, I
don't seea difference in the distinction if they're botheconomists and their
predictions are mere "Entertainment.'" Da-dum!
While on the subject of Mr. Greenspan's testimony, rest assured it's bound to be
somewhat short. So happens that Members of the House have to mosey on over for a
joint session of Congress, when Pres. Bush is expected to address the assembled
and rally them in support of his tax cut plan.
Believe it or not, we're not, yet, done with the economic calendar. Monday
brings Existing Homes Sales, Tuesday brings Durable Goods shipments and orders
and New Homes Sales, in addition to Consumer Confidence, not to mention a
milestone: the very last auction of One-Year Notes. Then add in Preliminary
numbers of Q4 2000 GDP, the Chicago Purchasing Managers Report, as well as the
National Association of Purchasing Manager's (NAPM) manufacturing and
non-manufacturing Index, as well as Personal Income and Spending, Construction
Spending, Vehicle Sales, and a European Central Bank announcement on Rates, and
you'd hardly think there's room for investors to care about industry specific
events.
Not True!!! First, Microsoft and the Department of Justice will argue their
cases before the appellate division in the long-running anti-trust case that, so
far, leaves pending Judge Penfield-Jackson's breakup decision. Since I really
don't care for the company's tactics or the constant crashes and "illegal
operation" messages," I'm surprised to find myself favorably disposed to
initiating a LEAP's position in (MSFT). Not because of the trial or WIN or
Office 2000, but because of early buzz on the long-awaited xBox. (Bear in mind,
my stock in trade is event-driven trading--capitalizing on upside trading
opportunities associated with a specific, identifiable catalyst.) Given the fall
debut of xBox, I'm considering MSFT, just as I'm buying AOL TimeWarner (AOL) in
advance of the Thanksgiving release of the Harry Potter movie, and Mattel (MAT)
in advance of Barbie's cinematic (direct to home video) debut. Likewise, since
I've mentioned Harry Potter, I can't help finding Scholastic (SCHL) tempting,
again, at Friday's low of $41.75, in advance of, not just the coming Harry
Potter movie, but the March earnings release, when the sales of Potter shipped
for Christmas actually hit SCHL's bottom line. In the mid-to-high-30's, I'd like
it even better.
As per usual, the conference/meeting schedule is dominated by tech and
healthcare, but there's an event or two outside those sectors, as well.
Commodity Classic, starting Sunday, brings together soy and corn growers, with
most investors focused on IBP. The ABA presents Community Banks, in Orlando, on
the same day, and it wouldn't hurt to pay attention when the upgrades come. The
regional and community banks won't suffer declines in investment banking, won't
be hurt by bond defaults from the likes of corporations, like Xerox (XRX) and
Lucent (LU), and generally, greatly boost their bottom lines when rates are
falling. The Geneva Auto Show takes place this week, so expect Merrill Lynch to,
again, present it's Global Auto Outlook, which may differ from mine, which is
negative. Around here the dealers are offering 0.9% financing, which doesn't
seem profitable, yet does seem desperate.
Of the analysts' meetings, Gateway (GTW) doesn't excite, Qualcomm (QCOM) may
facilitate additional recovery, Alza (AZA) has analyst support and technically,
looks like it's hit the bottom of the recent range and bounced off support. AZA
competes with Electronic Data Systems (EDS) potential good trades. EDS has
lately garnered more respect than Computer Sciences (CSC), which has fallen out
of bed. Problem is, EDS has failed a number of times at $67 and may not make it
above that level this time, either. Nonetheless, Merrill Lynch holds it's
Computer Services Conference, this week, and though Convergys (CVG) is their top
pick, EDS would have to be considered a close second.
Last, there's the Intel Developers Forum. Billed as a meeting of Intel
development partners, count on analysts and the press attending. Then add in the
Compound Semiconductor Outlook, in San Diego, also starting Monday,
Microlithography { I'd been pushing stencil maker (UTEK) since it was $17 and
now has pulled back to support), in Santa Clara, WESCON (905 electronics
exhibitors), in Anaheim, Etronix (semiconductor equipment), NEPCon West (printed
circuits and electronics assembly, where (FLEX) is the assembler of xBox), a
couple of Broadband conferences (one of which is in QCOM's top target, China), a
CSFB Communications Conference, as well as Merrill Lynch's "field trip" with
institutional clients to Dell Computer Headquarters, and you might just conclude
there's too much tech noise for any of it to make a difference--especially when
it's Alan Greenspan that everyone wants to hear from. On the other hand, don't
be surprised if NASDAQ continues the rally started late Friday. It's very
oversold.
If consumer brands is your cup of tea, then Merrill Lynch's annual conference
could lift Avon (AVN), Tricon Global (YUM), or P&G (PG). But the tradeable rally
I mentioned in the title of this piece meant NASDAQ ought to see a lift, which
makes the others the wrong sector for this week's rotation.
Which, finally, brings us to the finish line: healthcare. AAHP is the American
Association of Health Plans, which includes a group that's been strong--too
strong. Falling employment cuts memberships; lower profits cuts the ability to
raise premiums. Take your profits. Enzyme Technologies, in San Diego, is mainly
for researchers, though it's sponsored by Maxygen (MAXY), Genecor, Novo Nordisk
(NVO), ThermoGen ((KOOL), and Diversa (DVSA), all which will present. Cancer
Intervention takes place in Durango, where Genentech (DNA) is the headliner.
AAOS, for Orthopaedic Surgeons, meets in San Francisco, also Wednesday, While
Friday is the start for both the Annual Addictions Conference, in Boston, as
well as the American Academy of Dermatology, in San Francisco, where, Apple
Computer (AAPL) is a n exhibitor for computer enhanced imaging, while Merck
(MRK) is presenting. (Premium subscribers to www.wallstreetinadvance.com can
link to sponsor and exhibitor lists. Space precludes more here..) Then, next
weekend brings Genomic Tri-Conference, in San Francisco, which should keep the
newspaper stories coming through next week. Just bear in mind that Lehman's
Global Healthcare Conference begins Tuesday, in Orlando, and it has often
coincided with a biotech run that begins with the Chase H&Q Conference very
January. Don't to overstay your welcome.
As to the titles atop this page, rest assured I expect some continuation to
Friday's late day rally. In fact, a NASDAQ run to 2600-2800 wouldn't surprise.
But unlike other technicians claiming the NASDAQ has put in a double bottom, my
months ahead outlook relies on a triple bottom. First, March and, especially,
early April earnings warnings should crush investor confidence (Sandi's March
Monthly Outlook is published here.). Secondly, even if the third leg of the
decline doesn't arrive that soon, I'd expect it in June-July, or October. With
companies still slashing expectations, comparisons still tough, and corporate
spending not yet on an upturn, there's plenty of time for the averages to retest
a third time--exactly what I expect them to do.
Congratulations to colleague, Mark Leibovit, of VRTrader.com, whose market
timing, last year, beat most others'.
{C} Sandi Lynne, 2001 A full schedule of events is always available, free, at
www.wallstreetinadvance.com. Nothing contained in this commentary should be
construed as recommendation to buy or sell any security. Though positions can
change at any time, as of this writing, Sandi and/or her affiliates were long
Intel, Dell, Merck, Qualcomm and AOL, some for many years, against which
she/they maybe short calls.
By Sandi Lynne
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