Geesh what happened to our thread? Oh, ... yeah.... I see....
MU has been running a steadily reliable 38 week pattern since at least 1997 where the vertical red lines have marked a bottom each time. However, the last cycle turn resulted in an inversion of the cycle. The next cycle turn is targeted for the week of April 24th.
See chart on our main thread at our site or just chart a 38 week cycle off the lows of the last few years ignoring the last one.
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Macro view ramblings......
I sit here this weekend and run through charts and am in a quandary. Some defensive stocks such as MO, a few dividends and many of the non tech issues look ready to take a pause. The McCellan Oscillator, High Low charts for tech etc and our weekly signals are hinting at a bounce in the near future. To back this up, the RYDEX histogram chart from the street com looks like it correllates very well. Still, tech stocks are too highly valued on a grim outlook for earnings if one looks at reality and not hopes and dreams that aren't likely to come.
I looked back at some of the techs that lead this move down in April 98 and it gives some hint of what is likely but it by far no guarantee. Those stocks had a strong bounce, then settled back down and have been trading in a tighter and tighter range ever since. The ones that saw an actual earnings recovery of some sort fit this profile while the ones that were all hype and never saw real earnings appear have just slowly and quietly wilted away in a slow death on low volume or else are still doing so.
The whole Gold move has become interesting as the gold moving with the dollar thing we talked about a few weeks ago finally broke and the dollar fell back while gold shot over 300 an ounce. Gold has since pulled back some but the gold stocks themselves have remained strong as have lease rates hinting this market may now finally be in a bull. HGMCY went over 10 dollars Friday while their convertable bond that was a buck and a half a few months ago is now priced like the stock was then and shot to 6 bucks Friday, yes that is a 500% gain and it isn't a tech stock. -g-
As I still try to contemplate the gold issue, I check around at all the foreign currencies. With the exception of the Euro and British pound, most currencies have pretty much devalued either in reality or in practicality. Bush has reiterated this weekend that he wants a strong dollar but is this saying one thing as a set up or prelude to doing another? The strong dollar has been our forte for the last decade and has enabled us to loan out money to foreign markets enabling us to push our debt onto them and continue our status as a debtor nation. While not an ideal situation when we could be running a balanced checkbook, it is the best thing to do if you are going to run up huge debt as it is better to stick them with our debt than to further burden our own people who have enough debt to choke a horse already.
The problem comes from the disparity of how far many foreign currencies have fallen recently in comparison to the mighty greenback. The old Big Mac Index has to be really going nuts about now in many of these nations. With the South African Rand collapse, how much is a Big Mac down there....a million bucks? How about Argentina, Japan, etc.
Now as we try to pull ourselves out of recession, how many foreigners can afford US goods as their currency collapses? Can TYC, GE, IBM really be doing that much business abroad with most of the world in recession and the business they are getting paying in devalued currencies. We had better hope they are real good at hedging their currencies or there may some bad lines in the 10Q later this year.
I have maintained throughout the last few months that I feel our own economic health will not be too bad and that we are already bottoming. My only problem with the market is valuations on the issues most people are STILL Playing, the gorilla techs, speculative tech and largest well known blue chips. Smaller stocks in the non tech arena are starting to move up finally as money rotates out of bloat and back to where it is needed enabling the mid and small cap companies to expand and invest in future output that produces real goods. Strength in industrials seems to be occuring already while it may not be obvious in government reports. Stocks like CUNO which sells filters for industrial factories has broken out of a multi year trading range and earnings are growing which tells me someone is turning some factories back on. Packaging stocks like W, SON etc while not clearly breaking out yet, have made nice bottoms and moved up thus far.
I maintain that it is probably OK to do some buy and hold for mid term plays in non tech issues that have real earnings though most of the moves have already occured as far them catching up. Higher PE ratios are justified with low interest rates but that does not mean that a tech stock deserves a 300 PE on 3% growth like many of these are doing now. What I mean is that company that makes a better widget for use in a factory, assembles parts overseas for sale here in the states or some other real business that will maintain demand can be more highly valued than before. While I love charts and still dablle in some techs from time to time, think with a more macro view from time to time and look at the forest, not just the trees.
Overseas production is now paying employees in devalued cheap currency and then bringing products back here for sale. I don't see prices dropping for any of this stuff here so savings are not being passed on. That means they are keeping the profits thus profits should be higher in coming quarters. I have maintained for over a year that many of our blue collar jobs will head overseas and that it will stay that way. I would steer clear of companies that produce here with the aim of increasing sales overseas and concentrate on those that produce overseas and sell here until we see a real change in the dollar.
To go full circle to the beginning where I asked about the dollar. At some point this whole scenario is going to become too obvious or hurt our own big domestic producers that want to sell and grow overseas to the point where they pressure Washington to abandon the strong dollar policy. A strong dollar is great for selling our debt but is hurting the big multi-nationals. The unknown once the dollar is allowed to slip a bit to get on more equal footing with foreign currencies is can it be a controlled leak like we deflated the bubble to some extent or will it get out of control and deflate too much?
Gold prices are hinting that the time may be growing near for this event and it appears that many are betting that the drop may get out of control. A few hard assets never hurt.
Good Luck,
Lee |
