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

To: Benkea who wrote (34630)	12/3/1999 10:23:00 AM
From: LaVerne E. Olney	Read Replies (1) \| Respond to of 99985

December 3, 1999 Market Comments by Don Hays The market is obviously celebrating the continuation of "good" economic news. Goldilocks is still alive and well, and the soup is "just right" this morning. The futures are out the roof before the opening. This comes when only 28% of all stocks on the New York Stock Exchange are trading above their 200-day moving average. This also comes two days after the price of scrap steel has jumped up again, and indicating a strong supply and demand for the manufacturing sector. But it also comes at a time when the price of gold failed to hold at its 290 support level. The wage numbers coming out this morning still seem amazingly under control, so only inflation that seems to be around is in those 65 stocks that are carrying the bull market. And as of now, they still seem raring to go even higher. We are seeing the Russell 2000 tagging along. . .some. Yesterday, David Henry of USA Today featured an article showing the action of the smaller stocks in the Russell 2000. This study with Salomon Smith Barney's name attached showed that of all those 2000 "smaller" stocks, the stocks that had no earnings had appreciated 7.1% year to date. The stocks with earnings were still down for the year by 6.0%. The same phenomena was apparent for the Russell 1000, which is the market-cap weighted index of the largest 1000 stocks in the US. In fact the disparity was even more dramatic. Those stocks with no earnings had moved up by 50.9%, and those with earnings were down 2%. I think I have to go back and look in my textbooks. That's not exactly what I remember they said should happen. Of course, that study mentions "average" earnings, so it is not a perfect study, but still an amazing one that illustrates the craziness of today's market. But for those 28% of the stocks that are able to swim upstream in this "bull" market, they look like they will continue to soak up Mr. Greenspan's gorging of money supply and the margin debt that it is engendering. As we noted in an earlier comment, consumer sales has an amazing correlation to the action of the NASDAQ Composite. The action of the NASDAQ Composite in recent years has had an amazing correlation to the growth of the broad aggregate of the money supply. So the recent upsurge of money supply is working its magic again. Both new home sales, and auto sales have rebounded from the very slight pause of last month when the NASDAQ composite had taken a short sabbatical. But how big can he allow this bubble to expand? The NASDAQ Composite is absolutely thumbing its nose at Mr. Greenspan and this new era discipline that the Fed is supporting. The rise in scrap steel and the action of the NASDAQ, coupled with strong Christmas sales, and the jump in housing and auto sales will test his tolerance level. So as we get ready to enter the new year, we will see all kinds of cross-currents that threaten this bull-market. With the highest valuation in history, we continue to be skeptical of these new highs in the indices while only 28% of all stocks on the NYSE are able to trade above their 200-day moving average. The Hays Market Focus Advisory Group does not guarantee the accuracy or completeness of the report, nor does the Hays Market Focus Advisory Group assume any liability for any loss that may result from reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice and are for general information only. Hays Market Focus Advisory Group, 2828 Old Hickory Blvd., Apt. 1808, Nashville, Tennessee 37221.