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

To: Rarebird who wrote (40776)	2/19/2000 5:45:00 PM
From: Jags	Read Replies (2) \| Respond to of 99985

>>Is the reason why the Nasdaq has held up better than the Dow and >>S&P merely on account of speculation or is there something more >>fundamental going on here? This very question has crossed my mind. Given the future possibilities in the tech sector, it looks like fundamental strength. But then there are sooooo many newbies in the market, caught up in finding that next 5x or 10x stock, that they do not care about anything else. And then there is the ever increasing retail volume on nasdaq and the recent increases in the margin loans. Then again, valuations are just as speculative as the future possibilities are in the tech sector. If the picture gets less rosy, valuations will readjust. Instead if the picture gets more rosy, valuations will continue to get more out of line. Jags

To: Rarebird who wrote (40776)	2/19/2000 7:09:00 PM
From: bobby beara	Read Replies (1) \| Respond to of 99985

>>>Nasdaq has held up better than the Dow and S&P merely on account of speculation or is there something more fundamental going on here?<<< bird i'm surprised at this question -g- I've got a Wyckoff Supply/Demand Idealized Cycle chart here I'm going to send to Haim. It's a leaning S shaped curve, with the bottom of the S showing oversold (caused by fear) and the top of the S showing overbought (caused by greed). With an upsloping line going thru the S as the primary growth trend. With this market you have such extremes with most stocks on the oversold part of the curve and the techs at the top of the curve. I don't think this is real healthy. On the contrary indicator front (to add to mdd posts -g-) in todays LA Times the front page devoted the left most 1/6 column to the market slide and included a floor trader wiping his brow and the dow chart. At all other major bottoms since i've been following the market, the Times has made a major full top half spread about the market slide, with the headline in 72 to 100 point type. This 1/6 column article was in 36 point type. At the October 99 bottom there was such a spread after Greenspans "risk premiums" speech, on the Saturday after expiration I think the complacency here is because of the nasdaq rally, we have had about the same percentage dow drop so far from the top as the october slide. I think a close below 10,000 will make a front page spread here. My guess is that front page spread will come with fibonacci 55 day cycle which comes in around next Sunday. Another interesting point here is that both the october 99 headline and todays small headline gave the plunge on RATE-HIKE FEARS. This is while the bellweather 30 year bond has broken it's downtrendline after a period of extreme bearishness on bonds. I know, I know, it's no longer a bellweather -g-, more new era speak -g- b

To: Rarebird who wrote (40776)	2/19/2000 7:47:00 PM
From: Michael Watkins	Respond to of 99985

Is the reason why the Nasdaq has held up better than the Dow and S&P merely on account of speculation or is there something more fundamental going on here? 10 years from now more than half of these tech companies will no longer be around; but I'm pretty sure we'll still be seeing quotes from GE and C around. Will PPRO or SSSW or CHINA be there? Who knows. My take then is that the Nasdaq remains at its levels "merely on speculation". Tech companies producing tools to make companies like GE more productive should not in the end enjoy the big valuations that they are. There have been many technology and business management crazes. Business Process Reengineering; ERP systems; Centralized Computing; Decentralized Computing; Centralized Management; Decentralized Management; Mainframe computing, personal computing, network computing, ultra personal computing; now back to more centralized computing on the web. Spartan user interfaces; rich user interfaces; spartan user interfaces again. The internet is to computing as the telephone is to communications. Sure its important. But it will lose its glamour over time. Everyone now is expecting the Information Age Stocks to begin to roll over. I wonder. They just hit new highs this past Thursday. Well its always a bad thing when something attempts a breakout on higher volume, and then fails. So its natural for people's guards to be up. The divergence between the rest of the market and the techs can't be ignored either. For the NDX 3957 is a key level which on Friday the NDX came within 2 points of. Any action below this level and my guard goes up; a break of 3848 and I'll be looking for a rally to short (although mindfull that a rally could be the real thing...) On the Nasdaq Futures, the NDH0 level I consider key is 3973; the market closed at 3965. The first few bars are going to be interesting on Tuesday, perhaps on Sunday when Globex reopens. Again it will only be a hint until the lows in the congestion period are taken out and any subsequent rally fails. About the most diabolical scenario I can think of is that both markets rally but the Nasdaq starts to fail as money moves to seemingly safer ground; a big Nasdaq failure kills the rest of the market as all panic. ;) Lets watch what happens to the SOX and NWX, they should provide early clues. Both have more or less pulled back to their pre-breakout resistance which is now support (I'm looking at a 45 minute chart). Time to get defensive if they move back under support.

To: Rarebird who wrote (40776)	2/19/2000 10:32:00 PM
From: pater tenebrarum	Read Replies (1) \| Respond to of 99985

RB, <<Is the reason why the Nasdaq has held up better than the Dow and S&P merely on account of speculation or is there something more fundamental going on here?>> something of both i would say. first of all, the ultimate fundamental in stock market valuation is emotion. rationalizations put forth by analysts (not needed in bull markets, not wanted in bear markets) as to why stock XYZ should trade at such-and-such a level merely serve to pass the time. imo they have no utility at all. let us look at an example from a stock market mania of the past, RCA in '29. it was the hi-tech darling of its time. one could actually argue that its peak valuation in '29 was in a sense not entirely irrational. after all, apart from a brief dip in the early years of the depression (30-32), its business continued to grow by leaps and bounds for decades to come. and yet, after the top was in it proceeded to lose 97% of its value and only regained its old high sometime in the late fifties. simply put at its peak in '29 the stock market priced in decades of growth in a single euphoric moment. the same holds probably true for many of todays tech stocks. as i have mentioned on another occasion, there was an interesting comment made by an analyst on CNBC regarding Cisco as its market cap passed the 500 bn mark. to those of us who are a wee bit incredulous at a a big cap trading at 40 times revenues, he had this to say: "as long as Cisco continues to deliver 50% annual sales growth, no price is too high for the stock". really? CSCO is about as close to a one-decision stock as one can find. it and a handful of other behemoths remind me very much of the 'nifty fifty' of the early seventies. the arguments put forth back then to justify the valuations were essentially the same. and yet, as the bear market hit, the nifty fifty lost between 70-90% of their value. some regained their old highs 12, some 15 years later, some never saw their early 70's peak again. funny enough though, during the time when their stock prices were in precipitous decline, both their revenues and earnings continued to grow apace. so in one sense the analysts had been right: the nifties great fundamentals in terms of growth continued. unfortunately for their shareholders, the stocks just didn't seem to care, for more than a decade. my conclusion is that todays market darlings will ultimately suffer a similar fate...fundamentally, the birth of the new economy is a momentous event, and strong growth is probably a given for a long time to come (interrupted by the occasional recession). but one day the stocks will put in a top that won't be seen again for a long time regardless. regards, hb