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Strategies & Market Trends : MARKET INDEX TECHNICAL ANALYSIS - MITA
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To: dvdw© who wrote (10959)3/3/2002 4:04:55 PM
From: Dan Duchardt  Read Replies (1) of 19219
 
dvdw,

I have a question that is in no way intended to dispute the validity of your observations about the existence of value stocks in today's market. I happen not to be particularly good at identifying them, and certainly P/E does not tell the whole story. I have at times invested in stocks with low P/E only to find that down the road there was good reason for the prices to be falling based on anticipated growth, earnings, undisclosed problems, whatever. I sincerely tip my hat to anyone who can do the DD you talk about and identify the true value plays.

My question is to what extent do these, or will these value plays drive the market indexes that are the focus of this thread? Will 20 or 30 or 50 or even 100 mid-cap value stocks gather enough interest to lead the market back up in the face of continued decline of the hugely capitalized former shining stars? Perhaps there are indexes other than the common ones everyone looks at that should be getting more attention, but I can't see major indexes responding favorably to above average performance of selected low and mid-cap issues. A flight from the old stars to stocks that are fairly valued or undervalued will continue to put pressure on indexes like the NDX until all the old high flyers are replaced by the emerging leaders. It's part of the magic of indexes that when stocks falter they are thrown out and replaced by emerging leaders, but it will take more rounds of replacement like the recent NDX shuffle to rescue the index unless the existing components can turn things around. Without them, long index investors will still be in for a rough ride.

Dan
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