Acampora bullish again
Prudential Securities' technical analyst sees Dow at 10,000 in 1998-99
February 23, 1998: 8:12 p.m. ET
ÿ NEW YORK (CNNfn) - A longtime bull, Prudential Securities chief technical analyst Ralph Acampora turned negative late last year - saying the Dow could reach as low as the 6,000 level in 1998.
ÿ ÿ ÿ Now, he's turned bullish again, resurrecting an earlier prediction that the Dow could reach 10,000 this year. Acampora joined CNNfn anchors Jan Hopkins and John Defterios on "Street Sweep" to explain why. Excerpts from the interview follow:
ÿ ÿ ÿ JAN HOPKINS: When we talked to you in the fall, you had become quite worried about the market indexes. You are not so worried now; right?
ÿ ÿ ÿ RALPH ACAMPORA: Yes. In the latter part of 1997 I saw a lot of deterioration and indeed we did see a lot of deterioration -- about 60 percent of the stocks over the counter dropped at least 20 percent during the last 3 months of 1997. But so much has happened since then. In the middle of January, the markets started to improve, and right now the most important indexes are setting new all-time highs. It looks very, very good here.
ÿ ÿ ÿ JOHN DEFTERIOS: And it seems like the stocks are being driven by the blue chips right now.
ÿ ÿ ÿ ACAMPORA: It is the blue chips, but we technical analysts also look at broader-based indexes and the entire breadth of market is making new highs. The S&P Mid-Cap index is at a new high, and I think it's just a matter of time before the small- to mid-cap stocks start playing a game of catch-up. [The fact that the market] is broadening out is positive.
ÿ ÿ ÿ HOPKINS: Is it also positive that it looks like there may be an agreement with Iraq so that there won't have to be military strikes against that country?
ÿ ÿ ÿ ACAMPORA: Yes, we're starting to get more and more good news coming from that part of the world. I think the airlines [will] benefit because oil prices are going down. . [In general] the markets held up very, very well despite the problems developing in the last few weeks. Everything looks good.
ÿ ÿ ÿ DEFTERIOS: Microsoft (MSFT) is up nearly $4 today in this "post-split" environment. Two months ago, everybody was very concerned about their legal troubles. What has changed in terms of the environment surrounding the stock and why are investors willing to pile in?
ÿ ÿ ÿ ACAMPORA: I can't speak about the legal problems that Microsoft is involved in, but I can say that a lot of the concerns have taken a back step, maybe when Microsoft softened their position a little bit with the government.
ÿ ÿ ÿ HOPKINS: That is quite a move today, though -- $4 on what is now an $81 stock.
ÿ ÿ ÿ ACAMPORA: It is exciting because people look at the price and think it is a lot more reasonable for not being a $150-$160 stock. I think it is going to bring in more and more money.
ÿ ÿ ÿ DEFTERIOS: When you look at stocks participating in this rally - Microsoft, Dell (DELL), Oracle (ORCL) - do you feel uncomfortable with the valuations we are getting for the bigger technology stocks?
ÿ ÿ ÿ ACAMPORA: Well, valuations always play a role in the market, but you know multiples are a confidence factor and if people are willing to pay for that, then they obviously feel good about things. I think whether it is the Mideast or the Far East or bad earnings expectations, people are willing to live with bad news and look farther into the future. I think you are going to see higher prices.
ÿ ÿ ÿ HOPKINS: Technology stocks are poised to continue to do better? It looks like we're going to have a record [today] in the Nasdaq for the first time since last year.
ÿ ÿ ÿ ACAMPORA: Yes, I think the Nasdaq will do that, actually. I saw the strength first appear in the semiconductors several weeks ago, and now it is just broadening out. Confidence levels are increasing.
ÿ ÿ ÿ HOPKINS: What about your predictions for the end of the year? Are you comfortable talking about where this market is going to be then?
ÿ ÿ ÿ ACAMPORA: You really want to pin me down. For quite some time, especially last year, I had a Dow forecast at 10,000, and that was supposed to happen by June of 1998. But since we had that weakness in the last part of 1997 that we were talking about a few minutes ago, I pushed [the 10,000 mark] back out into 1999 and said that we could get 8,600 early in this year. Well, we are practically there now.
ÿ ÿ ÿ I have to say - not in writing yet -- that if this market continues to broaden out, and it looks like it will, I will lift that target. And maybe bring back the 10,000 [target] or even higher.
ÿ ÿ ÿ HOPKINS: You may bring back the 10,000 target for the end of the year?
ÿ ÿ ÿ ACAMPORA: Oh, possibly. Yes.
ÿ ÿ ÿ DEFTERIOS: With Alan Greenspan testifying tomorrow, you are confident with what you are saying about this market target that interest rates stay where they are?
ÿ ÿ ÿ ACAMPORA: I think there is enough evidence to suggest that Mr. Greenspan will at least stay pat with rates, and [if] the market works its way, interest rates will work their way slightly lower. So it is an environment that will be benign for stocks, and I think the stock market is reflecting that.
ÿ ÿ ÿ HOPKINS: Do you want to talk about some of the stocks and sectors you like?
ÿ ÿ ÿ ACAMPORA: Some of the semiconductors, or the Microsofts and Intels (INTC) of the world are not overdone. I think they have a long way to go. Texas Instruments (TXN) in that area looks very, very good to me.
ÿ ÿ ÿ I know Merck (MRK) had a very good day today, but a lot of the drug stocks look good - Bristol-Myers Squibb (BMY), Merck, small- to mid-cap names. . Hormel (HRL) looks great to us. Dial Corp. (DL), Barnes & Noble (BKS). . . . It's exciting because I have more names and more groups that look like they want to go higher.
ÿ ÿ ÿ DEFTERIOS: Oil drillers have not been one of those groups, with oil prices today well below $16, down nearly $1 a barrel. And there seems to be fairly heavy selling on that front at valuations that seem quite reasonable right now. Are you tempted to go back in?
ÿ ÿ ÿ ACAMPORA: You are absolutely right. I think the political pressures around the world are obviously backing up into the oil price . [and] energy stocks, especially the drillers. But I think there is going to be a great opportunity in some of these big-name oil stocks like the Exxons (XON) and Chevrons (CHV) of the world. No great rush to buy, but definitely open up the pocketbook.
ÿ ÿ ÿ HOPKINS: At the end of last year you were nervous about Asia. Has that nervousness gone away or are we still going to see effects from Asia?
ÿ ÿ ÿ ACAMPORA: I think you are going have repercussions from Asia, but I think they will manifest more or less in the individual corporations here who have an earnings impact, and you can't be naive enough to think that is not going to happen. But will it be a major pull-down on the U.S. market? I don't think so.
ÿ ÿ ÿ DEFTERIOS: Having said that, after the G-7 [Group of Seven] meeting [of industrialized nations] in London this weekend, Japan said that it was not going to be wrestled into an agreement to stimulate its economy. That decision could really worsen the trade deficit. Looking at the numbers last week, that does not bode well for U.S. exporters.
ÿ ÿ ÿ ACAMPORA: In fact, it doesn't bode well for that part of the world. The big country we have to look at is not Indonesia but Japan, and I suspect that they are playing hardball. But someone is going to blink at the 11th hour, and I think it will have to be Japan. [174Kb WAV] [174Kb AIFF] ÿ
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