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Strategies & Market Trends : Stock Attack II - A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Lee Lichterman III who wrote (6870)	5/3/2001 6:09:22 AM
From: dennis michael patterson	Respond to of 52237

Lee, interesting news on RFMD Thanks. Here is Hahn last night on Soxx: "The semiconductor index failed to breakout above mid April highs. The candlestick is a bearish gravestone doji, implying a trend reversal."

To: Lee Lichterman III who wrote (6870)	5/3/2001 6:44:32 AM
From: dennis michael patterson	Read Replies (1) \| Respond to of 52237

Lee, I'd love to hear your thoughts on this. I find it very interesting: LOGIN Subscribe Daily Charts Historical Charts TA Course Glossary Chart Spotlite TAC Home The OEX Advantage May 03, 2001 Volume 97, Issue 11 VISIT our NEW AND IMPROVED WEBSITE at baresearch.com. JOIN NOW! Become a Bedford & Associates Research Group member. All new members are entitled to FREE trials to our services. GET IT NOW!!! ---------------------------------------------------------------------------- ---- ----------- Support Resistance DOW 10876.68 - 21.66 10616.10 10936.20 OEX 657.33 + 1.78 628.10 683.90 SPX 1267.43 + 0.99 1217.90 1288.30 OTC 2220.64 + 52.36 2034.60 2250.30 Yesterday was a very volatile session but when you really look at the tape, it went according to plan. The bulls got off early, sending the DOW and SPX exactly to overhead resistance at 10,936 and 1,272 respectively. If bulls could have moved through these levels bears would have had no choice but to cover short positions and moan about what could have been. Instead, bears stepped-up and stocks moved decidedly lower. In fact, at one point the DOW fell to an 80-point deficit as energy and consumer issues swooned. As all of this was happening technology bulls kept-up the pressure. They never really got a good shot at NASDAQ 2,250 but the tone was very constructive. So, where do we go from here? As we begin trade today both the bulls and bears find themselves in the same predicament. It has not been settled if the next major move will be higher. There is one thing that has changed, stocks are now even more extended than they had been previously. If bulls are going to make their move higher, it is not going to be easy. We think stocks are likely to head lower and for one very good reason, a lack of fuel. For weeks traders have talked about enticing the public back into the stock market. Stocks have rallied sharply and there is more positive talk out of Wall Street but the public is not being drawn into the market. Volume has been very poor on this leg higher and all technical traders know that is perhaps the most important part of any rally. Sell early strength.

To: Lee Lichterman III who wrote (6870)	5/3/2001 8:21:12 AM
From: dennis michael patterson	Read Replies (2) \| Respond to of 52237

Damn Lee: this is good-- Tech Stocks Jump but Earnings Still Hobbled By Peter Eavis Senior Columnist 5/2/01 6:52 PM ET Whatever happened to Nasdaq 1500? With the Nasdaq soaring 36% over a month, it appears that investors have once again shed their reluctance to pay up for questionable earnings streams. While no one is reviving the bubble-era argument that stock prices now reflect rapid future profit growth, it's now de rigeur to place your faith instead in the Fed or in technical market measurements. But at the end of the day, people won't pay $400 for a Big Mac just because they heard someone else did. Yet investors now paying more than 500 times forecast 2001 earnings for Yahoo! (YHOO:Nasdaq - news) are doing just that. History shows that each age has its blind spots, and this one's inexplicable recurring weakness is for companies that make very little money or, more often, none at all. Though the Nazz is nearly 50% off its high, people investing in tech stocks are still doing the equivalent of throwing four C-notes at a hamburger. Take a look at the price tags on tech companies. Bargains at Half the Price The Nasdaq 100 index has a market-cap weighted price-to-earnings ratio of 102, based on projected 2001 earnings. By how much are Nazz 100 earnings expected to grow in 2001? They're not. They're supposed to fall by 7%, again using a market-cap weighting that accords a 50% weighting to the index's seven largest stocks: Microsoft (MSFT:Nasdaq - news), Intel (INTC:Nasdaq - news), Cisco Systems (CSCO:Nasdaq - news), Oracle (ORCL:Nasdaq - news), Dell Computer (DELL:Nasdaq - news), Amgen (AMGN:Nasdaq - news) and Sun Microsystems (SUNW:Nasdaq - news). April Flowers Detox forecasts May showers Yes, as we all know, the stock market is a forward-looking beast and now it's factoring in a future recovery. Sure enough, analysts expect weighted Nasdaq 100 earnings to jump 62% in 2002 to $31.17, from 2001's $19.20. Hence, at its Wednesday value of 1962, the Nasdaq 100's P/E ratio for 2002 is 63. This is just about the same as its growth rate, giving a price-to-growth ratio of 1, which, at first sight, would appear very reasonable. However, as the recent past has taught us, Wall Street analysts' forecasts have all the accuracy and dependability of a $10 Rolex. Better to take an average of the 2001 and 2002 earnings. This is fairer for the bulls because it reduces reliance on 2001 earnings, which they see as exceptionally low because we're in a turnaround year, and it benefits the bears who think it foolhardy to rely on the sell side's 2002 earnings forecasts. A 2001-02 average produces $25.19 in average earnings over the two years (31.17 + 19.20 divided by 2). The Fosbury Flop Dividing the Nasdaq 100's 1962 by 25.19 produces a P/E ratio of 78. Can earnings grow at 78% or more? Not without a miracle. In the boom years of tech spending, 1998 through 2000, earnings at the tech companies in the S&P 500 index grew by an average of 14%. Taking Nasdaq 100 weighted actual earnings for 2000 and the weighted forecast numbers for 2001 and 2002, these 100 corporations have an average growth rate of 28%. If the long-term earnings growth rate for tech stocks turns out to be around 20% -- roughly the midpoint of the above growth figures -- the price-to-growth ratio on the Nasdaq 100 is nearly 4. That can't last. When the adjustment comes, don't be surprised if Nasdaq 100 stocks fall to trade at twice that 20% growth rate, or at a P/E ratio of 40. In that case, 40 times our 2001-02 average earnings of $25.19 would produce a Nasdaq 100 level of just over 1000, which is nearly 50% below the current level. If the wider Nasdaq Composite Index fell by 50%, it'd be sitting at 1110, well below the 1500 mark Detox once predicted. When will we get to 1500? When the folly of the Fed's pump-priming shows up in an inflation rate that the market can't ignore. Inflation is already bobbing around five-year highs, going by the Cleveland Fed's inflation index, arguably the fairest measure, so the market already should have freaked. It hasn't yet, testifying to its willingness to bet everything on Greenspan's handling of the economy. When the Fed has been discredited, investors will have nothing left to base their optimism on. Then, the 1500 call will look bullish.