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Strategies & Market Trends : Market Gems-Trading Strong Earnings Growth and Momentum -- Ignore unavailable to you. Want to Upgrade?

To: Jim Baker who wrote (4861)	2/17/2001 6:16:41 PM
From: puborectalis	Respond to of 6445

garzarelli....... Stock market analysis for February 16 For our subscribers: our new February report is now available online. (Click on "Current Newsletter" in the menu on the left.) The PPI released today initially caused much confusion since it was very far from the consensus. It worried economists that the Fed would have to be more cautious in its easing policy. Economists believed the PPI would be up 0.2% -- but instead it rose a strong 1.1%. The rise was due to the record rise in natural gas prices and the cigarette tax. We believe this report is a fluke but the real reason for Friday's market decline were warnings from Nortel Networks Corp., Hewlett-Packard, Dell Computer, and Schering-Plough. Our indicators turned bullish in early January after being bearish since May of last year. From their bottoms, the S&P 500 has recovered 3%, the Dow 8%, and the Nasdaq 5%. Market participants are looking for a sign that the current market correction is over. Since the Fed started easing, many hoped the market would rise immediately and since it has not, worries have mounted about stocks fundamentals. We see a few reasons why the market did not rise as soon as the Fed eased. The number of bullish advisors remains high at 66% (contrary indicator) and therefore we believe stocks will rise in a choppy fashion -- similar to the pattern in 1988. We are not worried about the fundamentals since when the Fed is in an easing mode, things should only get better. Normally, easings (or tightenings) by the Fed take six to twelve months until realized in the economy . We do not expect all industry groups to do well in this environment as is normally the case in bull markets. Because of the wide differences in sector valuations over the last few years, only groups whose P/Es are below their normal historical ranges and whose earnings growth should outperform the S&P 500's are good investments. We highlight our specific favorite groups and most recent upgrades in our report this month. (Click on "Current Newsletter" in the menu on the left.) Interest rate/bond market analysis for February 16 We believe the Fed will continue to ease and most of that has been factored into bond prices. Yields, we believe, should remain steady for the next 6 to 12 months at current levels. We would be buyers of stocks and overweight them relative to bonds and cash.