Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: pater tenebrarum who wrote (28842)	10/8/1999 3:26:00 PM
From: Lee Lichterman III	Read Replies (2) \| Respond to of 99985

Thanks. Monday might be interesting, the NDX and NASDAQ are forming hanging man formations if they close close to thier current levels. Bullish argument though says the NASDAQ is forming an asceding triangle and OEX double bottomed in August and September. We are getting close to that NDX trend/resistance line that has held numerous assaults in the past also. It is the yellow dotted line on my chart at my site. We have a bit more upside room but if this rally does try to go to expiration, it could come into play. A lot of disparity among the indexes. Good Luck, Lee

To: pater tenebrarum who wrote (28842)	10/8/1999 5:57:00 PM
From: Don Green	Read Replies (1) \| Respond to of 99985

New York: The longest winning streak among stocks in the Dow Jones Industrial Average may end this year: Coca-Cola Co. is heading for an annual decline for the first time in almost two decades. Coke shares have slid 21 percent this year as slowing sales and a product recall in Europe squeezed earnings. They've had only four worse years since they were listed in 1919. The last annual drop was in 1980, when they fell 0.03 percent. Whether this year's slump is the start of a new streak or a blip on the price graph depends on the ability of the world's biggest beverage company to turn around slumping sales and convince Wall Street it can meet its profit forecasts.

To: pater tenebrarum who wrote (28842)	10/8/1999 6:08:00 PM
From: Jacob Snyder	Read Replies (2) \| Respond to of 99985

Inflation troughs and PE peaks: I've been looking at a graph of inflation for the last 40 years, and comparing it with a graph of the market PE (S&P 500, trailing). In that time, there were 6 inflation troughs (including the latest, last year), and 5 corresponding peaks in the market PE. The latest PE peak, the one corresponding to the inflation trough of first quarter 1998, is not certain: inflation trough, PE peak: 1961, 1961 1972, 1971 1976, 1975-76 1983, 1983 1987, 1987 1998, ???? As you can see, there is a perfect correlation. Every inflation trough has a closely associated peak in the market PE. Looking at the graph, it is not subtle at all. The subsequent declines in market PE are proportionate to the rise in inflation after the trough. Several observations: 1. The CPI bottomed in 1Q1998 at 1.5%, and has since increased to 2.1% If this was a true trough (and not just a random movement within a continuing downward trend), then we should have already seen the PE peak. In all of the other 5 inflation troughs, the PE peaked within a year, at the very latest. Last month (I think; please correct me if I have this wrong), we just set a new high on the PE, at 31. So, either inflation did not trough last year, or the market is breaking a pattern that has held for 40 years. 2. The PE contraction is proportional to the inflation increase. Again, this is not subtle. It looks like a close and robust pattern. As inflation soared from 5 to 15% in 1996 to 1981, the PE got chopped in half, from 12 to 6. Ouch. The gentler 2% to 5% inflation upsurge in 1983-84 only caused a PE contraction of 13 to 10. A much littler ouch. 3. If inflation increases in 2000, it probably is going to be a mild increase, maybe from 1.5% to 3.5% I think the odds of a massive inflation surge, like we saw in the 1970s and early 1980s, is small. That would indicate that the expected drop in market PE in 2000 will be fairly small, in the 20% area. If you pick the right stocks (not inflation-sensitive, and with reliable and growing earnings), you could even make money while the overall market PE contracts by 20%, from 30 to 24. But it would be tough.