Special MarketCentral Report
We will be writing a special market report in this section on a periodic
basis to update you on the latest market developments and outlook. In
the meantime, we will be completing the official MarketCentral newsletter
and will inform you of our premier issue if you register on the
MarketCentral Newsletter Home Page. You can also view The Eakle
Report, Bob Bose's Weekly Updates, The IPO Report and Stock Site's
Daily Market Newsletter through MarketCentral.
Special MarketCentral Report For August 4, 1998
With the Dow Jones Industrial Average closing today below significant
support at 8600, down 299.43 at 8487.31, a wave of panic has hit Wall
Street. In our July 3rd, 1998 report we started out by saying the only
fireworks we anticipated would be to the downside. The market rallied
another week or so before a significant market top was in place. So far
the market has declined nearly 10% in two weeks and fears are rampant
that we are entering a bear market phase.
Market technicals have continued to erode significantly over the past
month as New Highs vs. New Lows, Net Advances vs. Net Declines, the
declines in the Transportation Averages, Utilities, Nasdaq and Small Cap
Stocks have all signaled technical breakdowns. Market Sentiment, way
too bullish at the top is finally starting to erode as famed Prudential
Bache Technical Analyst Ralph Acampoura turned from extremely
bullish yesterday to extremely bearish today. MarketCentral had been
anticipating a minimum 10% correction and had mentioned the real
possibility of a 15-25% correction before market sentiment turned
bearish enough to ignite the next significant market advance. We also
suggested selling overvalued and overextended stocks, remaining
cautious and defensive until the market correction unfolded.
At this juncture we are now looking for signs that this market decline has
run its course. So far we see no indication that the markets internal
dynamics are strengthening, an in fact we have witnessed further
deterioration on all of our key indicators. On the positive side, interest
rates have remained at the lower end of the recent trading range,
investor sentiment is beginning to turn bearish and we may be reaching
oversold levels on this decline leading to at least a short to intermediate
term advance. We have also remained above key trendline and
momentum support levels on our chart (click here) on an intermediate
term basis.
Regardless, we would caution investors in being too aggressive right
now. Selectively purchasing quality stocks with positive earnings
momentum, stocks that have declined that are a value situation and
stocks within industry groups that have remained strong during this
market decline should be candidates for cautious accumulation as this
decline runs its course.
Support exists under the market on the DJIA at 8300, 8000, 7500 and
7000. We don't feel it prudent to predict which of these levels will
ultimately hold, but feel monitoring these levels and the market internal
technical factors as we reach these support levels for signs of a market
bottom are critical.
The current market decline has been pressured by the latest selloffs in
the Asian markets, poor earnings performance in the second quarter,
predicted weakness in earnings momentum for the balance of 1998, the
record high overvalued levels of the market and the aging economic
cyclical position. As we had been reporting for months, these factors
were worrisome even during the final highs of the most recent rally and
as sure as night follows day, the next rally phase will begin during the
height of negative sentiment leading once again to a meaningful rally.
Gold and Silver and the Philadelphia Gold and Silver Stocks Index (XAU)
has retreated to our original recomendation level of 62 and is now again
at historic lows. Accumulating positions in the metals stocks for the
intermediate term would make sense here as a value play. Should prices
decline from these levels, we would still anticipate an intermediate term
rally to occur as prices are extremely depressed and seasonal strength
later in the year should materialize.
We will alert subscribers to any change in our market outlook in a
Special MarketCentral report should conditions warrant.
Roy Spectorman |
