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Strategies & Market Trends : MARKET INDEX TECHNICAL ANALYSIS - MITA -- Ignore unavailable to you. Want to Upgrade?

To: Bart who wrote (223)	6/27/1999 3:34:00 PM
From: pater tenebrarum	Respond to of 19219

Bart, i have to comment on your remark regarding stocks following earnings: earnings, imo don't matter all that much; interest rates are by far the more important factor in determining the overall stock market's direction. there have been periods when earnings were lousy and the stock market soared and vice versa. in a situation like the current one the market often manages to focus on the improving earnings picture for a while and holds up, or even rallies in spite of rising rates. but ultimately rates always win out. the most glaring example of this is 1987, where earnings helped the market to rise to record highs in spite of rising rates, and the outcome is well-known. '87 may look like a blip on a long term chart, but imagine what a similar percentage decline would mean to the market today. a few thousand Dow points could be lost in a few weeks if a panic grips the market. this is not to say that this will definitely happen, just that the possibility exists. regards, hb

To: Bart who wrote (223)	6/27/1999 11:59:00 PM
From: J.T.	Respond to of 19219

Bart, I think the bond boys have factored in 2 quarter point increases while the equity gurus have only factored in 1/4. Witness the bond debacle the last several weeks vs. stocks holding up relatively well as Columbo's evidence de facto. If there is even one whiff of inclination of another rate increase after FOMC implied indirectly or not, they are going to take out supports real hard. The well respected UCLA Anderson school economists say Fed is poised to raise rates 3/4 of a point. The two day equity wash-out play would commence here and tremendous buying opportunities become immediately available to the savvy investor. Poor Warren Buffet, I wonder what he is going to do with that $18 Billion in cash? Have a bonanza and buy, buy, buy... And then there is the FED Fair Value Model of the U.S Stock Market relative to Bonds: Simply divide next 12 months PEG (average projected equity growth rate of stocks in S&P 500)of S&P by the 10 year Treasury Bond Yield (6%): 1/28 = .0357 .0357/.06= .595 (40%) In other words, Based on this simple model, Stocks are 40% overvalued relative to bonds. This is not some hodge-podge model I made up. But something Mr. G has utilized as a simple barometer of market valuation. I think Bonds are a screaming buy in here, but the fact is... Is if Bond boys get whiff of potential 3/4 point rate hike (which I don't see in the cards), bond yields could back up to 6.5%. Best, J.T.