Interesting post Dwight. Thanks.............
MARKET UPDATE: WHAT A LONG, STRANGE MARKET IT'S BEEN
By Peter D. Henig
Red Herring Online
September 11, 1998
Is the market in a weird state right now, or what?
Sure seems like it.
Stocks have traded beyond the range of volatility into the domain of the bizarre as the major market indexes have been bouncing around in hundred-point chunks on international and domestic news reports that seem to slam investors out of thin air.
Hints of a rate hike by the Fed jacked up the Dow a record 350 points early in the week, only to have those gains evaporate over the next two sessions as quickly as you can say "impeach."
Thursday's session sold off sharply on news that Special Prosecutor Ken Starr had shipped some kinky, and potentially impeachable, details about Zippergate to Congress, only to have stocks bounce modestly on Friday under the belief that stocks had already digested whatever was in Mr. Starr's report.
But even so, is this really investing?
A strange brew
"Hands down, these are the strangest market times I can remember," said Bob Silvestri, portfolio manager for the Tiburon Group Pension Fund. "I've never seen such a confluence of bad news."
Mr. Silvestri noted that, at the market's worst, investors first needed to see Russia get its act together, the Federal Reserve come in with a rate cut, China devalue the yuan, and the Japanese markets find a bottom before stocks could head higher.
But then came Zippergate in all its glory, which created a new level of uncertainty in the market and a fifth element for investors to contend with. Suddenly, impeachment talk became lumped in with earnings warnings, analysts estimates, and inflation fears on the list of fundamental factors that could effect stock prices -- clearly a bizarre mix for investors to deal with.
Says Mr. Silvestri: "Impeaching the leader of the free world, because of his erroneous answer to the age-old question, 'So, how was your day at the office, honey?' is ill-timed to say the least."
Ill-timed and, perhaps, ill-fated for investors to see any kind of meaningful stability in the markets near term.
"I would agree this is strange trading," said Robert Robbins, technical analyst with Raymond James & Associates. "With all of the news reports, you don't necessarily know what's going to happen next."
Mr. Robbins says that the market right now appears stuck between 7,500 and 8,000 on the Dow, and could possibly be putting in a bottom at these levels, "although there's always something new that could impact the market these days."
Deflating inflation
Perhaps good old Alan Greenspan does, indeed, know more than the rest of us.
No sooner had the Fed chief hinted at lower interest rates than the Bureau of Labor Statistics released a better, or more specifically, weaker-than-expected Producer Price Index (PPI) for August, indicating little threat of inflation.
The PPI fell 0.4 percent overall in August, and 0.1 percent in the core rate, which excludes food and energy, Economists had been expecting a 0.1 percent decline overall and a 0.1 percent increase in the core rate. This gives the Fed the green light to actually go ahead and cut -- a move that may represent a much-needed break from all of the poor economic news that has been slamming stocks.
"The Fed cutting now, and more importantly stating that the greatest risk is no longer inflationary, marks the biggest sea change in its outlook since Greenspan was in diapers," said Mr. Silvestri.
And while bullish Fed moves may help divert investors' Starr-y infatuation with the sex scandal, it still creates yet one more wrinkle impeding a true market direction for bulls and bears.
For his part, Mr. Robbins is actually taking a stand and is near term bullish these days. Looking at Investor Intelligence numbers -- Investor Intelligence polls newsletter writers for their bullish or bearish opinions -- Mr. Robbins reports that bearish indicators are higher now than at any point since February 1995.
Counterintuitively, a bearish reading at 46.5 percent is actually a bullish signal to technicians, indicating significantly oversold conditions that the market has swallowed all of the bad news it can handle and that it may soon be time for some bullish indigestion.
As such, it looks like technology might once again lead this market higher. Just as stronger-than-expected earnings from Oracle (ORCL) and positive earnings guidance from Intel (INTC) and Dell (DELL) moved the market higher on Friday, Mr. Robbins expects that even more big cap tech stocks are ready to turn.
The analyst suggests investors take a look at Compaq (CPQ), and Micron Technology (MU), and says that Intel, which rose 5.87 to 84.94, "should be able to continue its run."
He may be right. Investment firms A.G. Edwards and Warburg Dillon Read both upgraded Intel today as well, while Gruntal and Co. bumped up Micron from Hold to Buy.
But that's just today. Anything can happen in this market.
The last time Intel released earnings, analysts took a peek behind the numbers.
Are the markets truly bizarre, or are they just driving us crazy.?Give us some help.
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