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Strategies & Market Trends : Technical analysis for shorts & longs

SPY 693.77

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Jan 13 4:00 PM EST

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To: Johnny Canuck who wrote (35546)	12/16/2001 12:40:12 AM
From: Johnny Canuck	Read Replies (3) of 69730

Article on Market direction and S&P valuation: Message 16781716 My studies -- in terms of immediate moves higher after the kind of dislocation we experienced in September -- still point to volatile outperformance by techs and early cyclicals, the capital-goods and industrial manufacturers like Alcoa (AA ), Boeing (BA ), Caterpillar (CAT ), 3M (MMM ), United Technologies (UTX ) -- stocks like those. Besides the big-name high techs [Harry: I essentially agree with most of the elements of the article. I am not sure I agree with their picks, but understanding that fund managers will still with well known and established names when the recovery come you can't blame them for going with them [alternative on the captial spending side DY and MTZ]. As for the retailers, I am not sure how you price them at this stage in the economic cycle. You have shoe companies like SHOO, SKX and VANS trading at a trailing P/E of about 8, but some of them have just in time models to reduce the risk of excess inventory. What kind of risk premium was priced in during the last recession/bear market? As for the timing of the recovery, my guess it will take longer than expected and it won't be a V shape. As suggested the extreme valuations given the current earnings out look caps their valuations. Only a change in the E in earnings expectation will get stocks higher. Short term the scenario I am working from is: 1) A re-trace from this critical support level, options expiration is usually a fake out. The trading Monday in the absence of news will tell the real mood of traders. Watch the critical 1944 level in the COMPX. If it break go short or run for the hills. 2) A failed re-test of the 2050 area. 3) A sell off driven by limited earnings outlook into the later half of January (MSFT earnings). 4) A rally there after as managers take positions for the year. Keep in mind the critical support levels of COMPX 2050 and 1944 to invalidate the hypothesis. Also remember the SOX will lead the COMPX.]

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