Don Hays Market Comment
December 10, 1999
To tell the truth this morning, I am having a little trouble concentrating
on the stock market. At this exact time, my daughter-in-law is delivering
me another (this will be #4) grandchild, a boy. Not here yet, but on the
way. And at the same time, I am within a week of moving into my new house
that has been 16 months in the planning and building, and oh how much seems
to be left to do. So if I start rattling about the new name of my
grandson, or about the granite, or the trim guy who seems to move
so.o.o.o.o slow, you will understand. I am going to try to give you a
comment on Monday morning, but traveling to Boston and New York on that day
to talk with institutional clients, so once again this is one of those rare
times when you will not be getting comments next week on Wednesday or
Friday unless something very unusual occurs in the market.
The market seems to be trying to generate a little enthusiasm this
morning, but there are just as many (or more) signs that it is losing
momentum off of that overbought juncture of five weeks ago. Isn't it
amazing that I am saying the overbought condition of five weeks ago, when
the NASDAQ and S&P 500 have just been making new highs. And even the
Russell 2000 managed to make a higher-high above the July 1999 peak (but
not above its all-time high made in April 1998?) And it blows my mind that
with the new highs in these indices, that only 27% of the stocks on the New
York Stock Exchange are priced above their 200-day moving average.
You would think with all these new highs, the market would be overbought.
But no, the McClellan oscillator hit its high five weeks ago, and now is
actually treading on the oversold level at -99. The McClellan oscillator
is a very good indicator to watch for signs of non-confirmation. And even
yesterday's drop to -99 is saying that the market needs to support here, or
it will be much more vulnerable to a sharper decline driving it to the
EXTREME oversold condition under the -150 to-175 level. Those levels have
a great record at producing significant buy zones. The -100 to -150 zone
is good, but not something to use for major signals.
I have just looked at all the stocks in the Dow Jones Industrial Average,
and of those 30 stocks, I find 11 stocks that are pushing the Dow up. The
symbols of those stocks are AA, AXP, C, XOM, GE, GM, HWP, HD, MCD, PG, and
WMT. But I find 12 stocks that made their high earlier in this year, and
look as if they are either in the process of establishing downtrends, or
already in established downtrends. These are T, CAT, HON, IP, INTC, JNJ,
MRK, MSFT, MMM, SBC, UTX. Some of these patterns are subject to my
interpretation, but I don't think you will find a strong argument against
the interpretation in most cases. And then the last 7 are in clear
downtrends, making their tops over a year ago in 1998. They are BA, KO,
DIS, DD, EK, JMP, and MO. So even in the mighty Dow, we have a minority of
the 30 stocks, 11 versus 19 that are in clear bull market patterns. That
is a much larger minority than the market in general.
Another feeling in my gut this morning is that the bulls are saying there
are so many bears, and the bears are saying that there are so many bulls.
Everyone is considering themselves contrarian. I could actually make a
case for both sides of the argument. I don't really trust my gut thoughts,
but I am finding even the bears (and I definitely am one now) have been
mesmerized (or maybe cauterized) by the action of the indices, and few are
expecting this little loss of momentum to be creating any immediate danger
of significant weakness. We'll see. But if that 1972 calendar proves to
have any predictive ability to our stock market future, the broad market
(advance/decline) made a short-term bounce high in the first week of
December 1972, and on the new high made in the indices in the first week of
January 1973, the advance/decline line barely moved up. That last high by
the indices in the first few days of the new year proved to be the last
time even the high flying "nifty-50" could keep up the charade. So far
this year is following that pattern, so we'll keep our eyes on the evolving
similarities. If Ed Yardeni's economic projections mean anything (and he
has been extremely good on the major contrarian economic trends in the
past), the economic and earnings problems should become very visible early
in the new year.
A little item that caught my eye yesterday was that the trucking companies
are having to raise rates by 5-6% because of a driver shortage. After
building a house, I can tell you (there I go) that there is a huge shortage
of construction workers. I noticed on a BP service station yesterday that
their big sign asking for new job applicants (not a highly skilled position
I would think) promised all kinds of incentives. One item that really
caught my eye was tuition help. That's one of those kind of perk expenses
that do not show up in the government monthly releases of average hourly
wages.
Okay, that's enough about stock markets, now let's get to grandchildren
and houses and moving and . . . Nah!! See you Monday. . .maybe. |
