To all --PLEASE read the following.
The gentleman who wrote this piece on AOL is very
intelligent and his words should be given serious
consideration.
"Subject: Market Summary
Date: Wed, Oct 29, 1997 18:25 EST
From: RMille2282
Message-id: <19971029232500.SAA26174@ladder01.news.aol.com>
I will give both a technical and fundamental view of the market, and address implications of where to expect it to go from here, as I see it.
After the market "crashed" on Monday, there was a heavy amount of buying the next day, when, as you know, Clinton spoke to reassure all. I now believe the heavy buying Tuesday was done buy institutions that knew (early) Clinton would be speaking. The following day ( today; Wednesday) Fed Chairman Greenspan spoke in a positive way. It appears to me that a lot of volume buying done on Tuesday may have been selling today, knowing the reassurance
would be over after today. Therefore, the bounce may have run its course.
Additionally, on a fundamental basis, there was something else that concerned me about Greenspan's testimony today. He said that events of the past few days ( stock action ) would serve to keep the expansion going longer. People who were shaken up ( and people who took losses ) would be slower to spend, and this would give the hot economy a break, and would keep interest rates to the low side. There was something that he didn't say though, and
that was how the effect of the slowdown in Asia would effect us. I believe he thinks there are implications of that crisis which will be transported here, but it's too early to tell the full extent of this.
As everyone has heard me say before, the stock market is the best leading indicator of the economy 9-12 months from now. It seems the stock market has just shot a warning across the bow. If our economy's growth is to slow next year, as Greenspan implied ( from what I made of his speech ), the stock market will fall somewhat.
Technically, the rally brought us back to about the place where we started going down fast; slightly above the 7600 level. In all likelihood, we will soon begin a retest of the lows which were experienced already this week. The market has seen it's high, as investors will begin to realize, and selling into rallies will be the Sport of Kings.
After the retest of the lows, we may get another charge to the upside, which will ultimately fail. The market will be in a trading range, and could later drop out of it, going to the low to mid- 6000's. Unless we get a dose of unexpected bad news that makes things worse. Not being a doomsday fancier, to sum it up, I foresee a lackluster market with a downside bias.
The first buying I may do will come at the retest of the recent lows. I'll be looking at oil service stocks ( offshore drillers ); CDG, PDE, and others. Also if Green Tree Financial, GNT, gets back to about $40 it would interest me. Until then, cash is most attractive.
Bob Miller |
