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Non-Tech : Elaine Garzarelli
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To: Zeev Hed who wrote (118)11/30/1996 4:45:00 PM
From: hoopsville   of 292
 
7/30/96 Elaine Garzarelli, IBD article: Turned bearish 7/22. Sees Dow and S&P falling 15-25% from their highs and Nasdaq as much as 35%. Wall Street caught flat-footed by the bullitin faxed off to readers last Tuesday morning because only two days earlier she had predicted the Dow would soar to 6400. She said one of her 14 key indicators, a measure of company earnings to cash flow, flashed an unexpected worning sign. "We were absolutely shocked," Garzarelli said. "I said, 'Oh my God, I've got a sell signal.' " The indicator signaled that cash flow isn't keeping up with reported earnings. And cash flow dictates the size of dividends, stock buybacks and spending on technology to boost productivity. The cash-flow indicator is worth 20 points, or one-fifth the model's potential total value of 100 points. The loss of those 20 points dropped her reading to 28.5. Anything less than 30 is bearish. The model has since dropped to 23.5. Four indicators are bearish and one is neutral. She predicts a correction of 3-9 months. Dow could fall to 4300 and S&P to 510. She recommends selling into rallies to raise cash. Her model must recover to 65 before she issues a buy recommendation. The wild card is interest rates. A rise in long-term rates could intensify a downturn, while a drop would make the bear market short-lived. My guess is that she won't go against her model and turn bullish because then she would have nothing left to sell. Also she didn't trust her model after the 1987 crash when it gave a buy signal and her followers missed most of the initial recovery.
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