** Brinker Brilliance **
Ocober 11, 1998:
Although fundamental analysis is key to loooking at the market,
Brinker uses technical analysis as a supplement to look at
inflection points -- a major bottom or major top. TA can be helpful
in measuring key market forces such as momentum as indicated in
volume trends.
The fundamentals are very bullish. We are going to be back into a
positive earnings trend for the S & P 500 by the second half of
1999. If that is true, that would suggest that we are a little bit
over 7 or 8 months from the point at which the first (initial)
quarter would begin where positive earnings would be reported. We
may be less than that in terms of the first month when positive
earnings would be reported. Although they are only reported
quarterly, they would still be accrued. Normally speaking, the
market has a tendency to discount inflection points like that by
approximately two quarters which would suggets that timing works
out pretty darn good for the market to reach its bottom in this
intermediate term correction.
Brinker is very, very excited about the fundamentals. The monetary
indicators are very, very favorable with the Fed. now in an easing
mode and providing plenty of liquidity to the system. We have an
extremely favorable interest rate trend with the 30 year bond
around 5 1/8% and the ten year bond trading in the fours. We have
a declining trend in short term interest rates accopanied by the
easing by the Fed. We have the drop in commodity prices that have
produced an inflation index that is highly favorable. We could be
looking at inflation as low as 1% going forward.
Brinker looks for rising valuations going forward as price/earnings
ratios increase in response to lower interest rates and very low
inflation. Once we get through a period of higher valuations
despite the fact that earnings are not doing much, then we move to
phase two of the upleg which will be fueled by the actual earnings
stream developing. This phase should commence by the second half of
1999 and then carry on beyond that into the year 2000. The
potential upside, if we were to look beyond our 6 12 months targets
of Dow 9500, S & P 1210 and NASDAQ 2014, is present. There are
times such as these at inflection points when you get increased
visibility. Sometimes your visibility is limited and sometimes it
is incredible. Brinker sees the visibility now as incredibly
favorable. There is the very real possibility that as time goes by
as we achieve new highs, that Brinker will see "substanital"
increases in the upside for the market. There is the real
possibility that he will be able to "substantially" increase the
upside targets as we go through the next six to twelve months.
There is the potential of "significant enhancement" in the upside
taregts if things go well on the way up. There is the real
possibility that this will happen.
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We are 7899 or 360 points or about 5% higher than the 7539
benchmark. The we are at 984 as opposed to 957 benchmark or 3%
above. We are at NASDAQ 1492. NASDAQ lower on the close on Thursday
below benchmark 1499. NASDAQ very volatile. Thursday could have
been a point where panic selling and margin selling peaked out
although volume remained below the Sept. 1 level on the tests this
week for all the indexes. Additional backing and filling in the
NASDAQ, could not be ruled out, all signs point to the S & P and
DOW having put in very important bottoms. The major averages could
be violated on a closing basis by some but not by much. Should be
within 1 - 3% from their benchmark lows. No necessity for the DOW
or the S & P to reach new closing lows. If they did so marginally,
it would be a non-event. Of course, the volume remaining below the
Sept 1. record level of 1.2b on the NYSE and 1.25b on the NASDAQ is
important.
The rally, if it did not already begin on Friday, there is a high
probablity it would begin within the next few days. It could carry
over for another week. The highest probability would be if it did
not already begin on Friday, it could begin any day, or the week
thereafter. The most important thing is to be fully invested.
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