J.T. ... While cleaning down some old files yesterday, I came across some things that may or may not interest you ...
Morgan Stanley Global Economic Forum, November 24, 2000 - Prepare for a Hard Landing - Stephen Roach
following are the first two paragraphs - full article at URL
There is great danger lurking in the global economy. The healing that followed the financial crisis of 1998 is turning out to be surprisingly short-lived. The risks of a hard landing, or an outright recession, are high and rising -- especially in the US. I would assign a 40% probability to such an outcome in the first half of next year. For me, that is tantamount to maximum alert.
The case for a hard landing rests on the combined impacts of two sets of macroeconomic forces -- a natural deceleration in the global economy and the possibility of a destabilizing shock. Several factors point to a natural deceleration in the global business cycle in 2001.
morganstanley.com
Dow Theory Letters by Richard Russell - February 23, 2002
by subscripton only - with apologies to Richard Russell
February 23, 2002 -- "Economists Seeing Rosier Picture," headlines Monday's (Feb. 25) Investor's Business Daily. The paper continues, "Some 60% of the National Association of Business Economics Forecasters say the economy is on the upswing. Only two of the 37 think the slump will last until spring. The poll predicts GDP will grow at least 3.5% in the second half of '02 and early '03."
That's great, but then why is Investor's Business Daily's Mutual Fund Index down 8.5% for this year so far? And why does the technical condition of the stock market look so poor? And why has the supply of stocks for sales been increasing ever since January 4? And why were 30 or the 37 "Major Indexes" listed on page MW47 of Monday's (Feb. 25) Barron's DOWN last week?
Ah, the stock market is marching to the beat of a different drummer. The only problem is that very few people are able to hear the drum.
If you just watched the close of the stock market each day last week the action appeared to be a back-and-forth puzzle, with the Dow moving down 157 points, then up 196 points, then down 106 points, then up 133 points. A stand off? Not exactly.
What we did see was a move out of a large number of "less-than-blue chip" stocks into the big Dow Industrial stocks. Buyers were opting for the safety of the big, blue chip stocks and that continued all week.
By week's end the Dow was up a total of 65 points, the S&P was down 14 points and the Nasdaq, which took the brunt of the selling was down 81 points.
The actual volume figures are most significant. For the NYSE the total upside volume for the week was 2.314 billion shares, while total downside volume was 2.982 billion shares. So although the Dow itself was up for the week, the volume was on the downside.
The Nasdaq figures were really lopsided. Upside volume on the Nasdaq was 2.77 billion. Downside volume was 4.43 billion. Tech stocks may be or sound glamorous, but investors are moving out of the tech sector in wholesale numbers.
If you look at the PTI charts which are up-dated on this site daily, you'll note that the PTI is now back to where is was last October. In four months the PTI has made no progress. This jibes with the Lowry's statistics that show that the Buying Power is actually below where it was in mid-October. At the same time, Selling Pressure has been climbing since early-January, meaning that there has been a steadily increasing supply of stocks for sale.
What's most significant is that this supply has grown during both market advances and market declines. In other words, sellers have been using all market action, advances and declines, to distribute stocks.
This has produced a steadily weakening price structure, and in my opinion it's only a matter of time before this weakened price structure topples over. The question is -- when it does topple over how far will the market fall?
The advance began on September 21. But at September 21 we never saw a thoroughly "sold-out" market. Secondly, the advance off the September 21 low never produced the usual "breadth thrust," the initial huge surge in breadth that has characterized almost every major market rise.
And since January 4 we've seen steady technical deterioration in the market, this despite the rise in the major averages.
Because market characteristics at the September lows were not conducive to a major advance, my thinking is that in due time the market will decline to, and probably below, the September lows. And the decline will continue until we see the usual signs of a major bottom of at least secondary proportions. This bottom should produce a massive breadth collapse with panic characteristics. Furthermore, when the turn to the upside comes, we should see a huge breadth surge with heavily lop-side advance-decline statistics of ten-to-one on the upside or even more.
Very recently, you may have noticed that the daily new low figures on the NYSE have been increasing. February 14 -- 50 new lows; Feb. 15 -- 50 new lows; Feb. 19 -- 59 new lows; Feb. 20 -- 77 new lows; Feb. 21 60 new lows; Feb. 22 -- 72 new lows. This rising number of new lows is a sign of technical deterioration and selling pressure.
My Big Money Breadth Index also smacks of technical deterioration. On January 2 the Big Breadth figure was 876. By February 2 the figure has dropped to 855. The most recent February 22 figures was 847.
The same is true but even more dramatic for my statistics on the 15 most active stocks on the NYSE. The latest figure here (cumulative totals of the daily plurality) show this index actually well below the low of September 21. This implies severe technical weakness. It tells us that the action, the big action, has been in distributing stocks day after day.
My overall conclusion is that this is a bear market, it's a dangerous market, and that over any extended period of time the direction of the majority of stocks will be down.
The true advance-decline ratio figures for last were as follows: Feb. 19 minus 39; Feb. 20 plus 25; Feb. 21 plus 3; Feb. 22 plus 30.
For the week ended Feb. 22 the Dow was up 0.66%, Transports were up 1.54%, Utilities were down 1.12%, the S&P was down 1.30%, the Nasdaq was down 4.47%, the Wilshire 5000 was down 1.32% and the Russell 2000 was down 0.89%.
For the same week on the NYSE there were 1,712 advances and 1,638 declines. There were 234 new highs and 137 new lows.
The P/E (operating earnings) for the Dow was 27.11 and the dividend yield was 1.83%.
The P/E for the S&P was 28.15 and the dividend yield was 1.45%.
The market is expensive, the strategists and economists are increasingly bullish, but the market action does not jibe with the bullish forecasts of the great majority of strategists and economists. This market is marching to a different drummer. What could the drummer be saying?
Maybe the answer is so simple that nobody sees it or hears it. Maybe the answer is that we are in a primary bear market. In a bear market stocks go down. The true reasons why stocks go down are usually perceived long after the market moves. Thus has it always been. Thus is it now.
dowtheoryletters.com
from InvestorLinks Top Market Timer Says, NASDAQ 5000 This year - by Peter Santini, January 11, 2001
The article is too old for me to access, so I will quote the 1st paragraph only from my hard copy
Like a hot knife through butter, the NASDAQ should go through 5000 this year. That's what Don Wolanchuk says and he's one of Market Timer Digest's Top Market Timers, having won 17 annual timing awards since 1989. Some of his greatest timing calls were widelyignored by the investment community. Wolanchuk forecast the bull market rally following the 1987 crash and called for a DJIA above 10,000. When NASDAQ traded at 1800, he forecast a NASDAQ 5000. In 1999, at the bottom of the oil market, Wolanchuk called for $30/barrel oil. He was Market Timer of the Year in 1995, 1996, 1997 and 1999.
... a few of my own posts on SI ...
Message 13491164
Message 13802010
Message 14347534
Message 14418419
Message 15409139
and lastly, from an e-mail to friends yesterday
Subject: ... thoughts ...
Date: Sat, 23 Feb 2002 12:02:41 -0500
From: Ken Wilson
starts as a specific e-mail to a professor and his wife at Penn State
Did you ever buy Abiomed as I strongly recommended to you in April, 2001 ... if yes, do you still have it? ... I forgot to bring it up when we were with you recently, and I suspect that you did not want to embarrass me ... I still have 5,000 shares now worth $50,000 ... I have lost $78,000 on it to date ... not one of my better trades to date (to put it mildly), yet the loss is pretty small against my other gains ... I am obviously disappointed, but still have tremendous confidence in Abiomed management and the AbioCor ... I am not buying anymore, even at $10, but I will hold indefinitely.
TO ALL - I have $16,000 invested in one other small company ... everything else is in cash ... I am trading S&P futures almost every day, which is a full-time job ... I am exploring bonds presently for part of the cash, but have just started seriously thinking about it ... I am staying away from new purchases of stocks, and probably will do so until at least July or November ... I believe the economy will improve for maybe another 3 months, and then fall apart again ... although a significant rally in equities is certainly not out of the question between now and the end of June, I still strongly believe that we will break the September 2001 lows before Thanksgiving (maybe break them
significantly) ... in any case, I will be studying futures trading and trading futures heavily through late spring ... I will also keep up with my daily economic and political readings ...
___________________________________________________________
ALL FWIW,
Ken Wilson |
