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Strategies & Market Trends : Trader J's Inner Circle -- Ignore unavailable to you. Want to Upgrade?

To: furrfu who wrote (44039)	6/12/2001 10:07:09 AM
From: LTK007	Respond to of 56535

link i lifted from a MDD poster:) good read. traders-talk.com <<CROSSCURRENTS 6-8-01 by ALAN M. NEWMAN HD Brous & Co., Inc.'s CROSSCURRENTS Alan M. Newman, Editor This edited excerpt from the June 4th issue has been posted to coincide with receipt by snail-mail subscribers. The entire issue is available via emailed .pdf file by your request to info@cross-currents.net. History shows that a friendly Fed has often been prelude to good gains for stocks but good gains (and more) have already occurred in only six weeks! From low to high print, the Dow gained 23.4%, the S&P 500 gained 21.7% and the Nasdaq Composite gained a hefty 43.7%. As a consequence, prices are still very much in nosebleed territory with both the Dow and SPX at about a 25 P/E and 6.5 times book values and Nasdaq over 300 times earnings and heaven knows how many times book. Trouble is, the more the Fed lowers rates, the worse history shows the subsequent outcome. Delving a bit more deeply into the history of rate cuts, we find the most interesting comparison (charts in actual issue). In ten prior instances, after four Discount Rate cuts the Dow averaged an 11.8% gain after six months and a 23.3% gains after twelve months. Not too shabby. However, in the seven prior instances where a fifth Discount Rate cut was necessary, the Dow averaged a 1.4% LOSS after six months and only a 6.5% gain after twelve months. The fifth cut is apparently a signal of overwhelming weakness. After four cuts, double digit gains occurred in 5 of 10 instances after six months. After five cuts, double digit gains occurred in only 1 of the 7 instances. And that case was in 1982, at the tail end of a secular bear market! Meanwhile, in only 24 trading sessions from the April 18th fourth rate cut, the Dow gained 11%, the S&P 500 gained 10.2% and the Nasdaq Composite rocketed ahead 20.3%, accounting for virtually all of the good times one might expect after the Fed's largess. John Dorfman of Dorfman Investments has revealed that the April-May rally was led by the chaff and the evidence clearly bears him out. "Fifty-nine percent of companies with above-average profitability have risen 10% since the end of March. That compares with 75% of companies with no net profits in their latest fiscal year. The figures are for 1,881 stocks with a market value of $500 million or more as of Monday." These facts show the mania is still very much alive as is the dream that valuations will never return to or even approach what in times past were regarded as normal. Participants have absolutely no fear of a further unwinding of the bubble and only believe prices can go up, even when they are still grossly overvalued. The urge to commit heavily to statistics pulled from the past is certainly one of the factors that brought $19.3 billion into equity mutuals during April and likely another $15 billion in May. Truth be told, during the most manic phase of late 1999 to early 2000, stocks without earnings rose the most rapidly on the basis that earnings didn't count anyway! Today's repetition of this phenomenon is proof that the mania still has legs, despite a 70% decline in Nasdaq and still grossly overvalued prices. In a recent study by Investars.com, those who would have followed the recommendations of major Wall Street firms have underperformed the historical averages by quite a bit. This goes hand-in-hand with our view that what passes for analysis elsewhere on Wall Street is utterly useless. Only four of the biggest firms have shown a positive return on published stock ratings. According to Patrick McGeehan, who covered the phenomenon in a recent NY Times article, CSFB placed first with a stingy four-and-a-half year return of only 7.6% while the firm of Robertson Stephens brought up the rear with a net loss of more than 36 percent. Bear this in mind as we remind you that Goldman Sachs started covering Priceline.com with a "Strong Buy" in April 1999 at $104. The rating was reiterated a year later at $80 and AGAIN five more times in the next six months down to $20. At least Goldman eventually lowered the rating to "perform" and more recently to "outperform." Morgan Stanley has had Priceline at "Outperform" since $104. Priceline now trades at $4.75. Just as 16 of Wall Street's big name so-called strategists have raised allocations to stocks repeatedly since the mania gapped Priceline to the stratosphere, we see a similar resolution to PCLN's unfolding for many other stocks as well. It was the best 18 years of all time. It has to end sometime, right? Check out the following pages for a real eye-opener: cross-currents.net cross-currents.net ***************************************************************************** -------------------------------------------------------------------------------- About ALAN M. NEWMAN ABOUT ALAN M. NEWMAN Alan M. Newman has been the Editor of HD Brous & Co., Inc.'s CROSSCURRENTS since the first issue was published in May of 1990. Mr. Newman is also the Technical Market Analyst for HD Brous & Co., Inc., a member firm of the New York Stock Exchange, and is a member >> end quote

To: furrfu who wrote (44039)	6/12/2001 10:25:17 AM
From: LTK007	Read Replies (1) \| Respond to of 56535

talk about complacency,^VXN has been dropping since 3pm Monday--now down two points to 53.55 at last look.max

To: furrfu who wrote (44039)	6/12/2001 3:50:43 PM
From: stormrider1	Read Replies (1) \| Respond to of 56535

<<I hope everybody has their seatbelt tightly fastened for today>> Geez, no kidding Doug. If this was a roller coaster ride they would probably ban it. Mike

To: furrfu who wrote (44039)	6/12/2001 4:52:26 PM
From: LTK007	Read Replies (1) \| Respond to of 56535

<Dow +26.29 at 10948.38, Nasdaq -0.83 at 2169.95, S&P +1.46 at 1255.85 : [BRIEFING.COM] In a turnaround that would make the 1969 Mets proud,i like that-max the market did a complete about face today. A significant warning from Nokia (NOK 23.26 -5.45) caused the market to sell-off this morning. The world's largest cell phone maker slashed Q2 sales growth to be "somewhat below" 10% vs its earlier estimate of 20%. This slammed not only the wireless sector, but all of tech, especially communication chips. The effect was so broad because Nokia has been seen as an oasis as it one of the few large cap tech/telecom companies where business was still strong. Adding to the melee early on were bearish comments from Goldman Sachs on the software group. On the positive side, Morgan Stanley upgraded Dell Computer (DELL 26.10 +0.84), but later Dell's president reportedly said that he sees no major computer uptick until Q4....Around mid-day, positive comments from some networking gear makers acted as catalysts to turn the Nasdaq around. Extreme Networks (EXTR 32.30 +2.33) and Foundry (FDRY 20.07 +2.24) made positive comments at a CIBC conference. Also, Nokia suppliers RF Micro (RFMD 25.80 -0.61) and Texas Instruments (TXN 34.90 -1.91) reaffirmed guidance despite Nokia's warning. These events drove most every tech sector higher. A former trader favorite was up sharply today: F5 Networks (FFIV 14.05 +2.25) was called the comeback kid by Merrill...Outside of tech, biotechs made a sharp comeback after opening well in the red on a warning from Affymetrix (AFFX 26.01 -14.94)....While cyclicals were weak, defensive groups performed well today, especially food and tobacco. Philip Morris (MO 49.10 +0.58) traded higher as its Kraft IPO prices tonight and starts trading tomorrow. The offering price has been raised to $30-$31, up from $27-$31 and is 7-8x oversubscribed....Light earnings calendar after the bell, only CMGI, LDCL, WCS....Despite the modest selling into the close (not surprising traders want to bank their intraday gains on a day like this), today's aggressive buying sets the table for a run at resistance at 2250. Consider this: the last gap down open (late May) was followed by five consecutive up days on the Nasdaq. hmm,who knows-maxDJTA -1.3%... DJUA +0.1%... SOX +0.2%... XOI +0.7%... NDX +0.3%... BTK -3.2%...> end quote.