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

To: HairBall who wrote (31322)	10/25/1999 4:05:00 PM
From: j.o.	Read Replies (2) \| Respond to of 99985

Hi LG - Thanks for the charts as always! And those nice inverted cups! Textbook stuff <gggg> Just thought I'd post our Market Doctor's ramblings - he's decided to put his name to his postings now...no longer the mystery man <gg> IndexTrade Economic Round-Up for October 25, 1999 [Archive] Weekly Series With a lack of surprises from economic releases over the past week, many of the financial markets posted tame volatility. The US Equity sector, on the other hand, was led by information drivers unique to its market in the form of earnings announcements, which provided some interesting movements across the major indexes. The main economic report last week consisted of Tuesday's CPI, which despite its implications of a firm undertone to a growth in higher prices at the consumer level, provided no shock to the Fixed Income sector either in accelerating the recent trend in higher yields or providing an upside relief trade in the form of higher prices. The US dollar maintained a tight trading range relative to currencies of major trading partners, and the hot commodities of Crude Oil and Gold continued to build value within wide price ranges (e.g. Crude 20-25$ and Gold high 290's to high 320's) US Stocks however, had a barrage of earnings announcements along with some industry shaking reports out of Congress regarding potential revisions to the Glass Steagall act, all of which took their toll on corresponding indexes. The Nasdaq got the initial boost from Microsoft's posting of very impressive results and then received further support from Internet companies such as AOL. The Dow, on the other hand, posted some gains off of Citi-Travels, got blind sided by IBM's concerns over future earnings and then ended the week with a massive shot in the arm from breaking news on Glass Steagall. The bottom line...earnings in general were probably a net positive to Stocks. The question to consider now entails... how will earnings fare for upcoming quarters? A few significant events must be taken into consideration in order to formulate an accurate response. These entail: 1) rising costs of capital for corporations. 2) Y2K issues. 3) macro-economic consumer spending patterns. It can be argued that corporate productivity and profitability has been largely the result from efficiencies gained from Information Technology and the evolution of the Information Economy. However another significant source of positive firm performance has probably been low levels of borrowing costs along with stability of market interest rates in general. Corporations have also reaped benefits from robust consumer confidence and corresponding consumer spending patterns. The question to consider is....what is the medium term outlook for each of these fundamental underpinnings? Firms such as IBM and Gillette have voiced concerns over the outlook for the next few quarters. Can recent increases in market rates and the potential of higher rates, Corporate preoccupation in insuring Y2K compliance, and anomalies arising out of potential Y2K disruptions (e.g. adverse consumer spending habits), paint a more negative scenario for Stocks in the medium term? Maybe...but the other side of the coin rests on the argument that although rates have risen, they are still relatively low on a historical basis, many firms may already be Y2K compliant and it is difficult to predict, if any, potential disruptions resulting from Y2K issues. I won't attempt to provide a concrete answer to this scenario but merely want to raise the topic for analysis. The negative scenarios are by no means far fetched, however, such factors such as the long-term strength in consumer spending and the continued healthy US demographic factors in Equity participation provide a strong counter argument. Stephan Kudyba (MBA/PhD)... "THE MARKET DOCTOR" Regards, j.o. indextrade.com