HURRAY ! You and I can "celebrate" !!
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09/20/2002: "Market Monitor"-John Murphy, President of MurphyMorris.com
PAUL KANGAS: My guest Market Monitor this week is John Murphy, president of
MurphyMorris.com.
And welcome back to NIGHTLY BUSINESS REPORT, John
JOHN MURPHY, PRESIDENT, MURPHYMORRIS.COM: Good to be back, Paul.
KANGAS: As an expert technical analyst give us your opinion of the stock market's current overall
condition.
MURPHY: Well, Paul, we're still in the midst of a bear market that's been going on for two to three
years, we had a nice bounce off the July bottom, not a very impressive one, very light volume, in
fact.
And over the last week or two that has been rolling over to the downside. Yesterday, for example,
the
Dow broke some support at 8,000, which was not good. What we're looking for now is for the
major
averages to come back, retest those summer lows and we think there's a pretty good chance they're
going to be broken.
KANGAS: Give us the levels that we should be looking at that could be critical for the major stock
indices. Let's start with the Dow.
MURPHY: Well, the Dow, 7,700 is a level that a lot of technicians are looking at. That was the
closing
low back right at the end of July. I'm actually widening that a little bit, 7,500 to 7,700. The reason
for that
is 7,500 is also the low that was set at the end of 1998. and right now the Dow is the only major
average
that's still holding above that level. So 7,700 is important. But to me 7,500 is more important. The
S&P,
the 800 level. And the real critical one right now is the NASDAQ, 1,200. That is, we're very, very
close to
that and I suspect that will be the first average to broke down here.
KANGAS: OK. Now, your last visit was March 8 of this year, and you felt the market, after a nice
rally,
was overextended but it might be telling us the recession was over. Have you changed your mind
since?
MURPHY: Well, in fact, I think it did tell us that. That recession was over. But shortly after that,
Paul,
the market did start to rollover. In fact, it took us till about the end of April, April 29, to be exact,
when
we mentioned on our site that we had gotten the first major "sell" signal in six months and we started
talking about the possibility of a retest of last September's lows. So, since the end of April, beginning
of
May we've been somewhat negative on the market and, of course, more positive on bonds.
KANGAS: Well, back in March when you were with us you liked some cyclical stocks, like Phelps
Dodge (PD), Louisiana-Pacific (LPX), General Motors (GM), Caterpillar (CAT), KLA-Tencor
(KLAC). But
according to your Web site, you got out of all of those. They broke support and you were gone.
MURPHY: Yes. At that particular, during that six month run-up, the cyclical stocks, the economic
were
the leaders, and that's what we like to participate in. But as you know, we're chart readers, Paul. As
soon as they started to break down we moved out very quickly.
KANGAS: Is there anything right now that you do like that you would actually buy at this level?
MURPHY: About the only group we like now, Paul, and we've liked them for most of this year, and
that
are the gold stocks. Normally in a low interest rate environment with the dollar weak and the stock
market weak, that's about the only group that has held up. They normally do well in this
environment.
So we've been suggesting to people that, we've been saying this all year, basically, that right now
about
the only safe haven left are the gold stocks.
KANGAS: So you're really saying that we're going to have a double dip recession?
MURPHY: It looks that way to me, Paul. And, also, another thing, housing stocks broke down this
week. That's been the last bubble and I think they're beginning to roll over, as well. So we believe
that
the markets leads the economy. And it does suggest to us that we are heading into a double dip.
KANGAS: Well, let's get more specific about these safe haven gold stocks. Which ones in
particular
are your favorites?
MURPHY: Well, our favorite is Newmont Mining (NEM). That is the biggest gold stock, kind of
the
standard bearer of the group. That is probably the most liquid of the group. But also Anglo Gold or
Gold
Field (GFI), to name just a couple. But for people, I think they can just put their money into a gold
mutual fund.
KANGAS: Do you or your interests own any of the specific stocks you just recommended?
MURPHY: No, we do not.
KANGAS: One last question, John. We just have about 40 seconds left. But when you see a stock
like
EDS (EDS) lose 50 percent of its value in one day, does that tempt you to jump in for a quick trade
on
the "buy" side?
MURPHY: No, not really. I know a lot of people like to do that, but, no. When a stock break
downs like
that, very often you do get a little bounce, but it takes, but normally that bounce doesn't last all that
long. So we're not tempted to do that. We don't like to buy into down trends.
KANGAS: OK. And, so stay away from inviting situations like that.
MURPHY: Well, that's not that inviting. An 11 year low, Paul, on massive volume. That's not that
inviting.
KANGAS: OK. All right, John, thanks very much, as always, for your expertise.
MURPHY: Thank you, Paul.
KANGAS: My guest, John Murphy, president of MurphyMorris.com.
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