John Murphy on the markets, from NBR
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PAUL KANGAS: My guest market monitor this week is John Murphy, President of MurphyMorris.com. And welcome back, John. Good to see you.
JOHN MURPHY, PRES., MURPHYMORRIS.COM: Thank you, Paul.
KANGAS: From your perspective as a technical stock market analyst, has the recent rally put Wall Street's bears back into hibernation and the bulls back in business?
MURPHY: I think it has put the bears back in hibernation, especially in the old economy stocks. The technology stocks, I think, have also bottomed. However, Paul, I'm a little reluctant to say that we're actually back in a bull market, especially in technology. I think we've seen the worst, but I think we're in a transition period right now.
KANGAS: Well, you know, this 11,000 area, which was so hard to get through on the up side, is now supposed to be a support level and we're only 5 points above it on the close today. Do you think it's going to hold?
MURPHY: No, I don't think so. I don't think it's really that important as a support level. We really didn't get far enough above it to really qualify it as a support level. I think that on a short-term basis, the Dow and the New York Stock Exchange Index, the old economy Indexes are up against their highs for the year. Technically they look very overboard at this point and we're also entering a period of seasonal weakness. So I think we're going to probably break below the 11,000 area.
KANGAS: How much below could we break?
MURPHY: Well, we've rallied 2,000 points. We could give back anywhere from a third to a half of that. I would say a reasonable number would probably be around 10,500.
KANGAS: When you were with us September 8th of last year, you said that most of your technical indicators from the stock market were signaling a slowdown in the economy and that certainly has taken place. That was a good call.
MURPHY: Thanks, Paul. Actually, we're saying just the opposite now. We pay a lot of attentions to sectors. For example, last year those economically sensitive stocks that moved with the economy like retail stocks, basic industry stocks, were under pressure and financial stocks were very strong. Now we're seeing the opposite of that. So the stock market, the sector rotation within the stock market seems to be suggesting that things are actually getting better.
KANGAS: Well, does that mean that your three recommendations in the financial sector of the last two visits with us, namely State Street Boston (STT), Chubb (CB) and Marsh & McLennan (MMC), all of which are much higher than they were when you first recommended them, on are on your "sell" list?
MURPHY: Yes. In fact, we turned negative on those stocks or we started rotating out of those stocks back in January, believe it or not, when the Fed started easing and the money started rotating into the more economically sensitive areas. We saw the money coming out of those interest rate sensitive stocks. So we're kind of-we've downgraded that group. We're kind of neutral on the financial stocks right now.
KANGAS: Well, the last time you said that the technology stocks looked pretty good. If they dipped, you liked IBM (IBM), Compaq Competitor (CPQ), Apple (AAPL) and Oracle (ORCL). Did you buy on dips?
MURPHY: They dipped a little more than we thought they would, Paul. We actually backed away from the technology stocks after the last Labor Day. We started nibbling back into IBM. We made a "buy" recommendation back in January and again in April in the 100 to the 105 area. So we have started nibbling back into the technology stocks, but only the technology leaders like IBM (IBM) and Microsoft (MSFT).
KANGAS: What is your favorite sector right now?
MURPHY: Right now with the with the market as a whole, we like the retail area. They generally do well at this point in the economic cycle. On a relative basis, they've also been doing extremely well. So that right now, the retail sector is our favorite sector.
KANGAS: Can we get specific as to issues in that sector?
MURPHY: Well, unfortunately a lot of the stocks have already run up quite a bit. But two that I think still are reasonably priced are Best Buy (BBY), Best Buy and Home Depot (HD), I think, still are pretty reasonable at this point.
KANGAS: Any other sectors? What's in second place?
MURPHY: Well, I would say that in the technology sector, although we're not that bullish on the sector, we do like the semiconductor stocks. We think they're bottoming out first, stocks like KLA (KLAC) and Applied Materials, Teradyne (TER), stocks like that. We think they will lead any rally in the technology sector.
KANGAS: OK. We just have 30 seconds left, John, but what would you avoid like the plague here?
MURPHY: Well, I can't-there's nothing I would avoid like the plague, but I will say that there are many of the technology stocks that have just done nothing over the last couple of months. They've shown no bounce at all like in the networking area, some of the Internet stocks. I think that's going to be dead money for quite a while and I would tend to stay away from that group.
KANGAS: In one word, bonds, yes or no?
MURPHY: No.
KANGAS: OK. The last time you said yes and that was right. Now you say no. I guess you're hoping that's right, too. Thanks very much for being with us again, John.>> |
