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Strategies & Market Trends : The New Economy and its Winners -- Ignore unavailable to you. Want to Upgrade?

To: 16yearcycle who wrote (11273)	5/3/2002 1:03:49 PM
From: Bill Harmond	Respond to of 57684

Brief Thoughts [BRIEFING.COM - Robert Walberg] Time once again for another brief look at a few key developments of interest... The Market Discouraged by today's insipid employment report, the major market averages are heading lower once again. Due to sharp declines in the tech and biotech sectors, the Nasdaq is pacing the retreat (-1.9%). Again, not an unfamiliar site. If the Nasdaq were to finish today's session in the red - and it will take a big closing rally to avoid that fate - the index will have run its streak to 11 losing sessions out of the past 13. Over this time frame, the tech-heavy index will have lost 11%. Meanwhile, the DJIA and S&P 500 have shed 3% and 5%. More alarming than the scope of the three-week decline is the depth of despair which has grown out of the downturn. Due to profit warnings from the likes of IBM (IBM), Nokia (NOK), Pfizer (PFE), Verizon (VZ) and Biogen (BGEN); cautionary guidance from one tech firm after another; endless hostilities overseas; a financial crisis in Argentina; and signs that the economic recovery is losing momentum; investors are depressed, very depressed. As such there is little to no buying interest - hence the one-way market headed south. Typically, when investor sentiment is skewed so far in one direction, the market will begin to act counter to the prevailing mood. In this case, that means we should see a bounce in the days to come. Briefing.com isn't suggesting the beginning of a major advance, mind you. There are still too many hurdles to overcome and insufficient visibility on the timing and scope of the long-awaited earnings recovery for the market to sustain a major advance. Nevertheless, we could easily get a very nice trading rally which carries the indices up 10% or more. Sectors The weakness in the major market indices over the past few weeks has masked the fact that there are still several sectors performing quite nicely. Home Construction, Defense, Gold, Managed Care, Insurance, Beverage, Household Products, Casino, Hotel, Tobacco, Auto Parts, Autos and Clothing are among the industries which have posted strong gains despite the market downturn. One look at these groups and you instantly notice that in most cases they are defensive in nature. In other words, industries that are expected to perform reasonably well regardless of the underlying economic conditions. It's also interesting to note that most of these groups have been providing leadership from January on. Consequently, readers that followed the relative strength strategy outlined by Briefing.com in its "Extrapolating January" Brief dated 1/30, would have done relatively well for themselves even in this turbulent market. Though investors will want to remain mindful of valuations, we see no reason to think that the market will change its preference for the relative strength leaders for the foreseeable future. As such, investors will want to pay keen attention to which industries are exhibiting strength, and which stocks from within those groups are outperforming. The Fed Almost lost in the noise of the steady decline is the fact that the Fed meets next week. One reason the meeting is drawing little interest from the market is that the Fed's hands are tied. With the market reeling and the economic recovery looking as though it is stalling out, there's no need for the Fed to raise rates - as had been speculated several weeks ago. On the flip side, the Fed won't lower rates just to accommodate a shaky stock market. So we're left with the near universally accepted opinion that Greenspan & Co. will leave rates unchanged. Assuming the Fed lives up to these expectations, next week's meeting will have no material impact on the stock market. Robert Walberg, Briefing.com