Hi Arik, in the early spring Dorsey and Wright had a bar chart showing sectors of the market with some type of valuation criteria. They compared it to the 87 chart showing all sectors above the 50% criteria before the crash. In the spring chart they showed that there were three sectors below the 50% criteria, making the case that the market was not in "crash" mode. Those sectors were biotech, utilities, and gaming.
I don't have any statistical data on any of these sectors, but from charts and TV coverage, it seems to me all three of these areas have zoomed lately, especially biotech. Maybe someone with some statistical data can confirm.
It would seem to me that you could replace the Spring 96 names like PRST, MRVC, IOM, with names like YHOO, Amazon, Rambus, Cien.
Of course, we could be in the Nikkei or 29' mode and just be heading for a twilight zone of valuation and a much more devasting crash, which is entirely possible. When you see companies continually report bad news and get bid up anyway, you have to consider this possibility. This kind of sentiment has changed measurably since early 97'. Stocks are being played like commodities and are played up or down by the news story of the day. I guess the bull/bear contest and the liquidity question remains. There is lots of money on the sidelines and if the bull wins again. That money will pour back in to stocks making bears into asses AGAIN.
I think we will have a resolution of which way this market will go in the next month and it probably is prudent not to bet either way until a clear path is present.
Can anyone with close experience of the Nikkei 80's market comment?
-Bob |
