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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Proud_Infidel who wrote (41344)	1/7/2001 9:27:18 PM
From: Ian Davidson	Read Replies (1) \| Respond to of 70976

From Briefing.com Updated: 08-Jan-01 General Commentary Investing can be hard or it can be relatively simple - it's up to you. On the one hand, you can expend energy fretting over the reasons behind the Fed's decision to move earlier and more aggressively than expected when it cut rates by 50 basis points on Wednesday. Do they know more than the rest of us about the severity of the slowdown? Did they move to head off the impact of a banking crisis in California related to the problems with that state's utility companies? You can also continue to agonize over the steady stream of earnings warnings and the sloppy performance of the old leadership names in technology. Or you can adopt the time-tested and very simply market strategy which says that you don't fight the Fed. Once the Fed moves from tightening to easing, it's rally time. Not overnight, mind you, as the market still has to work through the noise associated with the slowdown that necessitated the change in policy. But within a few months the market has historically righted itself, and after another few months have passed it's usually pretty clear that a new uptrend is firmly in place. Unfortunately, CNBC, CNNfn, the WSJ, Barron's, Time. etc. tend to overanalyze everything - especially a change in Fed policy - making it easy for investors to lose sight of the big picture. Changes in Fed policy are rare and major events. History tells us that when the Fed changes policy it should be your focal point. By moving to lower interest rates the Fed is telling the market that it will take whatever steps necessary to bolster the economy. And with a stronger economy comes stronger corporate earnings. Basically, by the middle of this year the economic/earnings outlook should be much improved. Traders should also keep in mind that any improvement will be magnified by soft comparisons. Finally, it is important to keep in mind that the market is forward looking. Just as the big market break early last year presaged the soft economy that we now see by several months, the market will begin to rally well in advance of the actual economic upturn. Given that the numbers should begin to improve no later than mid-year, it won't be long before stocks are beginning to foreshadow the economic recovery. How will they do that? By going higher. Though Briefing.com expects most of the tech sector to participate in the rally eventually, the overhang of disappointing earnings will result in some near-term turbulence. Consequently, traders need to be selective at the moment. One way to narrow the field a bit is to look for those stocks that have spent some time base building and/or moved back above their 50-day moving averages. Sprint (FON), KLA-Tencor (KLAC), Micron (MU), Worldcom (WCOM) and Altera (ALTR) all come to mind. Conversely, investors might want to wait a bit longer before jumping back into those stocks that continue to exhibit sloppy technical characteristics and/or relatively lofty valuations... A few such names are: Siebel Systems (SEBL), Broadcom (BRCM), Sycamore Networks (SCMR), Macromedia (MACR), Adobe (ADBE), JDS Uniphase (JDSU), Ariba (ARBA) and PMC-Sierra (PMCS). Whatever your strategy for stock selection, it should be guided by one simple theme - don't fight the Fed. As of Wednesday, that translates in to "buy." Robert Walberg