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

To: Dave who wrote (12664)	7/11/2002 8:59:30 PM
From: stockman_scott	Respond to of 57684

Briefing.com - General Commentary Updated: 12-Jul-02 For quite some time now, we have been focusing mainly on the negatives - there's just been soooo many to pick from it was difficult to do anything else... But today we want to highlight a few of the positives... Not just because the Nasdaq bounced back from early weakness yesterday to close with a modest gain... We predicted as much on this page yesterday... No, we simply want to remind folks that even though it looks very bleak in the markets right now there are some encouraging developments. Chief among them is the general improvement in the economy... Most noteworthy has been the pick up in business spending, as evidenced by the jump in factory orders, first rise in inventories in 17-months and the rebound in the ISM index... Strength in the trucking industry also a good sign that business activity is on the rise... Given that it was the sharp drop in corporate spending which pushed the economy into recession, improvement on this front is essential to a) a prolonged economic recovery and b) a rebound in earnings... Typically, one would expect the market to be ahead of the economy... Unfortunately, the market noise created by corporate scandals and ongoing global unrest has managed to drown out the favorable changes in the economic backdrop... However, if and when the scandals move off the front page, market attention will eventually shift back to the economy; and when it does, stocks could be in a for a nice lift. As for earnings, market sold off sharply in advance of Q2 results... Briefing.com notes that it's not unusual for indices to move in the opposite direction of pre-earnings season move... With so much negativity priced into market, even if we don't get a rash of new buying we should at least see some short-covering as the numbers start rolling in -- especially if they aren't terrible... Though it's an admittedly small sample size, the news out of the telecom sector after yesterday's close was good enough to compel shorts to cover, as JNPR, SONS and PWAV posted better than expected sales/earnings numbers. Other points of interest include the historically high VOX (volatility index) reading and the growing sense of despair -- both are indicative of deeply oversold conditions. Briefing.com is not suggesting that the bottom is in... However, based on the oversold nature of the market and the potential for some earnings-related short covering, we could see a near-term rebound that retraces between 38-50% of the most recent slide... Longer-term, the market can't ignore the economy forever... If the data continue to improve, so to will the earnings picture... Stock traders will ultimately be forced to take notice. Robert Walberg, Briefing.com