Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : High Tolerance Plasticity -- Ignore unavailable to you. Want to Upgrade?

To: stockman_scott who wrote (11125)	12/17/2001 10:42:39 AM
From: aerosappy	Read Replies (2) \| Respond to of 23153

Market View Update by exbondguy, 12/15/01 My weekly look at the market for a directional sense (I spend 98% of my time looking at individual companies rather than the market direction) did not shed too much light on the current situation. I continue to expect positive returns for December and January for the broad markets (December is currently slightly negative for the S&P 500). My bias is still that smaller capitalizations are a positive in this market - this is based upon seasonals and post-recession history, as well as current valuations. Also, technology should continue to outperform in the very near-term (again, watch SOX - it really does lead). My technical look at the largest 10 stocks suggests some (just a little) caution. If we have a down week in the S&P 500 this week, which, by the way, is the triple-witch, I may become a little more concerned that the consolidation that I see is actually a top (NOT my current thinking). This week saw particular damage to PFE, which had looked like it was on the verge of a breakout. They have an analyst meeting this week - I personally do not expect them to disappoint the way MRK and BMY did this past week (they are lacking the near-term generic threats). Of the top 10 in the S&P 500 (as of 9/30), the tech stocks look technically in the best shape (IBM and MSFT). In Finance, C is looking somewhat weaker, while AIG is improving. XOM continues to be weak, while weak SBC may be bottoming. The other large Health stock, JNJ, is slightly weaker as its expansion has moved to a consolidation. Retailer WMT's trend remains bullish. Of almost as much concern as PFE is big-daddy GE. It has been one of the weaker large-caps struggling to reverse a downtrend, and it seems to be faltering. I like to follow these big guys because they give a sense of the overall market - if they are all in bear-trends, it is hard for the averages to not follow. The overall read is neutral (which to me is bullish for other stocks). Compared to the rally that began in early April, it took a little longer this time to get to neutral. By the way, a look at the top-10 would have made one very nervous by 8/31 at the latest - so I will definitely be paying attention to this group. The Mid-Cap and Small-Cap averages are above their 200 dma and continue to look as though they are trying to get into a bull mode (which I define as the s.t average above the intermediate average above the l.t. average). I rate them as neutral currently, correcting from historically oversold levels. This is, as many pundits seem to say, a stock-picker's market. The averages look expensive, but the average stock does not. Even in the S&P 500, the median stock's valuation is consistent on a PEG basis with supporting investment. Further, PEs should be a little exaggerated at the bottom of a recession (assuming that is where we are). Earnings revisions (though not in Telecom!) have started to go higher in many sectors. Don't forget about the stimulus of lower interest rates, lower energy prices and potentially lower taxes - all of these things should hopefully drive revenues higher and/or reduce expenses for corporations. In conclusion, the current environment, filled with skepticism about the future investment returns from stocks and the direction of the global economies, continues to offer good opportunity on the long side for the intermediate time frame. The best parallel historically is probably 1973-74, based on the extent of how oversold stocks got and seasonals as well. This new economic expansion has probably begun. It will not produce the types of equity returns that we enjoyed in the late 90s, but, if making 8-12% looks good (and it should with 5 year Treasuries yielding 4.5% in a world of 2-3% long-term inflation), then stocks are probably a good long-term buy as well. messages.yahoo.com