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Technology Stocks : Amazon.com, Inc. (AMZN)

AMZN 220.66

+1.6%

Nov 21 9:30 AM EST

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To: H James Morris who wrote (59595)	6/1/1999 1:34:00 PM
From: Rob S.	Read Replies (1) of 164684

"The Trend is your Friend" . . . or your worse nightmare. You don't have to be a technical analyst to see that AMZN and many other net stocks have been moving down but unlike last fall, the corrections have not been on lower volume and have not been followed by robust rebounds. My "school's out for summer" theory is not at all scientific, but, IMO, the summer will continue to be poor for net stocks as a significant percentage of speculators clear their slates for other pursuits during the summer. There are too many factors that are causing the nets to move down that no amount of wishful thinking among sector bulls and analysts will reverse the trend until it has played itself out in mid to late summer: 1] Increased dilution in the sector. Massive amounts of new IPOs, sales by insiders and VCs, stock splits, etc. means that many more shares are chasing after money right at the time that . . . 2] . . . Money flows have turned negative. Mutual fund flows have shifted out of the high growth sectors and over-valued big cap issues and into value, overseas and defensive positions. Overall mutual fund flows turned negative (-3 billion) for the first time since last summer. The Fed has announced a bias toward increased interest rates, which has caused a contraction in overall liquidity. All this has a chilling effect on the market - particularly on the most speculative sectors. 3] This is the seasonally weak season for PC and Internet sales. No bones about it - sales growth is slower so Amazon and other etailers won't report the startling results that have spurred the speculative fever in the past. Regardless of your thinking on the sector or Amazon's long-term future, the point remains that sales right now are in the slack period and that effects perceptions which add to the other influences that are moving these stocks down. - just not much ball-banger things happening to get excited about. 4] The bulls remain in denial. There is still too much unreasoned optimism - the pendulum has not swung to the opposite extreme from unbridled euphoria. When the mood gets desperate latter this summer as fortunes continue to evaporate and margin calls have taken their toll, then the market psychology will be poised for the eventual turn-around. But be watchful bears, the sector will most likely ignite again.

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