Great article copied from AOL boards found below:......
Subject: Buyers Beware!
Date: Sat, Mar 7, 1998 14:09 EST
From: JimC4344
Message-id: <19980307191000.OAA17490@ladder02.news.aol.com>
I'm attaching a very good article from Mike Drakulich. Amazon will definetely be impacted by a market drop simply because it is on a very shot list of excessively overvalued stocks. I expect we will retest November 1997 low of $44.
Good luck!
3/7/98
WAVE SIGNALS
by Mike Drakulich
BODY PUNCHES AND KNOCKOUTS
An incredible reversal occurred Friday as Intel earnings warning turned into a one day downside wonder, as far as causing the overall market to decline. Intels own fortunes are another story. New all time highs were seen in the S&P and NYSE indices. I view these earnings warnings as a boxer who throws "body punches" to weaken his opponet for the later knockout punch. The second flurry of body punches occurred after Fridays close with Compaq's
warnings of NO earnings in the 1st quarter. Most tech stocks were reported trading significantly lower in Fridays aftermarket trading. Cpq down 2-2.5, Dell down 7-8, Msft down 2-3.
What's going on here? Does the new paradyne now include lower earnings forecasts as a Bullish event for the rest of the Market? With Cpq's announcement should we expect another 100 points up on Monday? If big Al Greenspan thought there was irrational exuberance over a year and a few thousand points ago, I wonder what he is thinking now? He actually answered that question in widely UNDER publicized comments in his recent Humprey-Hawkins
testimony. He said "investors in 12-18 months may be wondering why they bought equities at such lofty levels", not a direct quote but that is basically what he said.
We've now reached the totally insane and irrational period in this Bull market, that's how all manias end. Any bad news is totally ignored by the masses in the all encompassing greed to own equities and not be left behind. All previous valuation measures are off the charts and have been so for some time, the wild eyed Bulls tells us we're in a "new era" and they haven't and won't work anymore.
Back to an Elliott wave and technical perspective which is basically what I'm about. Fridays new highs registered the worst reading of any new high over the past several weeks. The McClellan Oscillator closed at plus 3, the worst close on a new high this year, and the lowest in a series of nonconfirmations over the past several weeks. My daily momentum oscillator peaked at +1456 on FEB. 4TH, it's been trending down the last month with the
serires of new highs, it registered a reading of +741 at Fridays close. Wave wise Thursdays decline looks like a wave 4 decline basis daily charts, as this rally should be a 5th wave high from the Jan. lows, potentially completing the entire rally from the Aug.-early Jan. corrective period. Also the Dow Transports usually lead the rest of the market, they peaked 3 weeks ago above the 3600 level, declined 6.6%, and remain almost 4% under their highs.
Blissful ignorance is reaching frenzied levels, body punches including interest rates above 6%, are being absorbed with seemingly no effect, and the Bull roars on. The technicals tell me those "blows" are have a tremendous effect "internally", while the exterior "facade" appears impervious to everything. I think the final "knockout" punch for this Bull is very close. Its very hard to call a top in this kind of market, the evidence however is
there that an end is very near, for the "very" few who want to look for it. If a top is going to occur we will likely know by the no later than Tuesday of next week. If the Dow goes above and closes above 8700, the mania will likely carry above 9000, and do so soon. Converely a downside reversal from current levels Monday or Tuesday, makes the liklihood of a blow off top very high. Good luck as it should be a wild and wooly Monday. Caveat emptor-let
the buyer beware!
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