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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host -- Ignore unavailable to you. Want to Upgrade?

To: Math Junkie who wrote (15471)	12/18/2001 12:35:26 PM
From: Skeeter Bug	Read Replies (2) \| Respond to of 42834

1. Smart Money Index continues to rise. did the smart money index predict the fall of stocks well in advance? wit sounds like a trailing indicator, not a crystal ball. 2. From recent Barron's interview with Ed Hyman and Nancy Lazar, the top-rated Wall St. economists: they predict that the economic rebound will start "in a matter of weeks, and by the end of next year would produce a 3.2% rate of growth in the real GDP." i suspect that the data underlying their conclusion was ommitted b/c it just doesn't exist. opinions are like... tell me why or don't tell me... 3. Hyman/Lazar also point to an interesting study in the same Baron's interview, a study which points out that the S&P is typically up 26% before a recession ends (we are currently up 18%) and THEN moves up an additional 16% within the next 7 months after the recession is declared over. this bubble wasn't typical. this isn't evidence of anything. 4. The percentage of stocks now trading above the 200-dma on the NYSE has increased from 20% (9/21/01) to 50%, which says that 1/2 of all stocks on the NYSE are already in an acknowledged bullish pattern. ok, we know the past now. does this predict the future? not a chance. many stocks were above their 200 day moving average at the top of the bubble! 5. Nasdaq has cleared its 200-dma for the second time in two weeks, both times on decent volume. same goes here. the naz skyrocketed right before the collapse. 6. CBOE Market Volatility Index (VIX) "40-20" rule (Courtesy of Wm. O'Neill of IBD): over the last 15 years, in every instance that the VIX has moved above the 40 level (as it did in September), the market has never experienced a significant correction until if falls below 20. isn't this like saying, it will go up if it doesn't go down? who's to say we don't see 20 soon? whose to say the relationship is more than coincidence? 7. Bullish sentiment is NOT excessive (forget the silly AARP survey) and the market continues to climb the proverbial "wall of worry". Look at where the money is going to tell you that this is so. It is NOT going into aggressive or growth mutual funds. Rather, it is STILL going into mutual MMF's, CD's, value-oriented mutual funds, etc. The amount of money in conservative, "bomb-shelter" instruments continues to rise faster than mutual fund inflows. It now accounts for 4 trillion dollars which are earning next to nothing. This will eventually find its way into the market. this logic is faulty. first, the money doesn't have to end up in the market. history tells us it takes a long time to do so after bubbles. second, it may find its way into the market.... but at much lower prices... but that wasn't the note's premise ;-) 8. Interesting chart from David Orr of Wachovia showing that the difference between the CPI and PPI has increased from minus 1% to 3% (Nov.2001) over the past year. This is quite bullish and is a good indicator of profit margins in the coming year. Obviously, if the cost of goods is low and CPI is higher, this goes directly to the bottom line. The CPI/PPI difference has only reached 3% or greater 4 other times in the past 23 years, the last two occurring in late 1991 and late 1998, as we were ending the last two recessions. Implication: we are ending this one as well. not sure what to make of this. 9. Finally, also from David Orr's work: the Inventory to Sales Ratio is 1.45, the lowest level it has been in the past decade, with a steady decline in the ratio over the last 7 years. No way we still have "excessive inventory". this may have some merit, but it makes some assumptions about future sales which may or may not hold true. Again, for those of you whose concept of the stock market does not extend beyond the Q (BRCD, BRCM, EMLX, QLGC, JNPR), this is meaningless. However, the technical indicators I listed in post #19377 and the above economic data should at least have all of you questioning whether we are still in a bear market. Steep corrections in overvalued tech stocks which have moved 100-200% over the past 3 months due to momentum players pushing them to unwarranted heights is an entirely different matter. hey, i can agree with this... :-) DlphcOracl why no discussions of valuation relative to future potential discounted for risk? isn't that what investing is all about? how can we leave it out and be taken seriously?