Hi Jim --- Here's the text from this morning's hotline update ...
Yesterday, the stock and bond market responded in a typically overreactive, and unwarranted manner, to an ill-disguised, intentional leak of confidential information from the Federal Reserve. Normally, of course, the secretive details of the minutes of any Fed meeting are never released until two days after their next get together, which in this case would be on May 21st after the upcoming meeting on May 19th. If the source of these opinions is an accurate and reliable one, however, it is apparent that brokers, analysts, and corporate chief financial officers can no longer claim to have a monopoly when it comes to playing manipulative psychological head games with investors and the market.
As a result of yesterday's selling, however, there were absolutely no interruptions at all in the longer term positive bias of any of the market averages. The same holds true for those members of the Select Fund family that had not already fallen into Sell territory. Even after yesterday's declines, only 13 Select Funds, and the small cap Russell 2000, declined to where they are now marginally below their 50 day moving averages.
Among the major averages, the Dow Jones Transports has now fallen right to its 100 day moving average, a point from which it has rebounded smartly the past two times that it touched that line. Only two Selects, Biotechnology and Food & Agriculture, have now slid below their 100 day moving averages, and we have long since written off these two sectors as unattractive investment candidates.
Obviously, by the time we awoke yesterday, the die had been cast and the downward direction of the market was already in the cards. There was little that could be done except to hang on and ride through the nonsense, and it also would have been advisable to turn off CNBC, to avoid a day long dose of journalistic hand wringing and doomsday fear mongering. Of course, while it would certainly have been a gutsy move to make under the circumstances, adding to your current holdings at yesterday's close may prove to be a timely and financially rewarding move in the near term.
Barring even greater downward pressure on the market averages, I see no reason to liquidate any of our current Select Fund holdings at this time. As always, one should not expect the market to quickly recoup all the losses it has suffered over the past three days, and it is highly likely that we will continue to see rather directionless trading until the much awaited April payroll report is issued at the end of next week. Until then, take a deep breath, hang tight, and take the time to step outside and enjoy what at least in New York City, is an absolutely beautiful sunrise today.
Have a good day investing.
Bernie Kaplan
Editor & Publisher
The Sector Fund Strategist
Copyright 1998
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