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WHY THE RUN FOR THE ROSES IS OVER... 1) Market leaders MSFT, INTC, WMT, GE (just to name a few)are rolling over and down. 2) INTERNUTS peaked 1 month ago and the 1st tier NUTZ are being overtaken by the highly speculative new IPO nuts as barriers to entry are none and the quickest way to make a buck is in low quality late stage issues. Too much supply as buyers will disappear and lofty stock prices will vanish from patch of blue sky. Look out below. 3) Interest rates may have to back up even more to 6.05% yield before the equity market says "NO MAS" and shifts money out of stocks and into into bonds. Regardless, the shear daily talk of Greenspan raising rates for over a full month means market will do the bidding for him. 4) Wasn't the Bull on the cover of Barron's newspaper May 3 issue? Stocks peaked shortly thereafter, on May 13. Just about the same time Goldman Sachs IPO got a piece of the pie. Au Contrare? 5) Advance Decline Index has not even come close to its July 98' highs. Granted, we have had much better breadth for since early part of April. But nothing like the runs or numbers in 1st half of 98 (let alone the tremdous run of 95 to 97). This is simply the "lower right shoulder" of A/D Index and major warning signal for next leg down. Do a little history with the market and you will know exactly what I mean. 6) Pricing power is dead and seasonlity factor is high. Witness Dell, CPQ, INTC. On the positive, HWP finally came in. I guess after going 0 for 12 in beating the street estimates, and the analysts continuously lowering their targets, probabilities had to come in sooner or later. 7) Speaking of probabilities, the decade of the 90's will go done in history as the mother of all bulls. We have been up literally every year except maybe for breakeven 94. Not to mention 4 years in a row of 20% market total returns and 99 is trying to make it 5X. A record of course. Time to lower expectations going forward. Who wants 10% when we are all spoiled with expediency in immediate returns NOW. Going to have to play the short side to maintain returns. 8) Milosevich is not going to comply with NATO demands. He wants international peacekeeping force and we say NATO must be at the front. Placement of groundtroops is the only alternative to get his attention. The willingness of use of forces and ultimate sacrifice that lives may be lost is the price to get rid of the Hitler. This will now take center stage. 9)On the periphery is reheating of cold war and Sino-Soviet embrace going forward. 10) Increasing protectionism with EU and rift with China causes problems for entry in WTO. This backdrop is picture for market to correct excesses 20+% and it is going to be sooner rather than later. Feel free to comment or throw stones in my glass house. J.T. |
