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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: GROUND ZERO™ who wrote (13854)	2/3/1998 9:59:00 PM
From: P.Prazeres	Respond to of 94695

Here's some of my thoughts: From the weekly newsletter on January 18, 1998: <<I know I've said this before, but I want to say it again. Unless you think that technology will come to a screaching halt, the risk/reward for some of the beaten down tech stocks is very compelling. Some of the tech leaders and strong companies are the ones to pick up. The weaker cousins could lag even after the slump as they don't have the resources to get them through this downturn.>> Over the past month or so the newsletter has been stressing the above statement in one way or another. On January 3rd, with the nasdaq in the low 1500's, the newsletter said: <<What happens with these earnings reports will say alot about what will happen to the Nasdaq in January. If the numbers come in as expected, the Nasdaq will more than likely make a stab at 1670 or even higher. >> Tonight, we are 3 points away from that target.ÿ Indeed it seems that the worst fears haven't come true and "snap up" that was expected in the Nasdaq is happening. The question is, "Is this sustainable?" Well, looking at one particular indicator, it is quite likely that the Nasdaq is headed to new highs and beyond. What is this indicator??? It is the crossing of the 20 day MA with the 50 day MA on the Nasdaq. [If you want to follow along with the following explanation, go to equis.com and put in the symbol .ixic"( don't forget the period before typing ixic)ÿ . This will bring up a java version of the nasdaq composite. Then choose the MA crossover indicator, and zoom out until last April is visible on the chart] . ÿ In particular, with today's close, the 20 day moving average (at 1577.41) is above the 50 day MA (at 1577.32)....and both are in an uptrend.ÿ These two moving averages crossed each other to the downside back on November 5th (one of many negative indicators last fall).ÿ Last winter during the Nasdaq correction, the same negative signal was given by these two MA's crossing. When they finally crossed again (in the uptrend) on May 12th, 97, the Nasdaq had already moved up about 120 points from its correction low of 1213+/-, or 9.89%.ÿ This time around the Nasdaq is 201 points above its correction low of 1465, or 13.7%. Now what happened after the 20 and 50 day MAs crossed to the upside? ÿ The index went from 1333 on May 12th to 1748 on October 9th or an additional 31.1% move in about 5 months.ÿ Is history about to repeat itself? Well, some on Wall Street are calling for another 30% move in the Nasdaq this year.ÿ That would put it at 2165.ÿ I'm having a hard time justifying that kind of move.ÿ Although if this goes into a blowoff phase, it is certainly possible.ÿ If the indeed the Asian troubles aren't as bad as once thought and with the technology growth happening in Europe simultaneously, with continued growth in demand in the US....if all three come together at once (or at least the perception of that happening) then maybe its not too far fetched, also. A few weeks ago, when things were looking terrible on the Nasdaq (Monday, january 12th, in particular, the "day of reckoning" as mentioned in the Jan 11, 98 newsletter), it was very interesting to see the Nasdaq put in what seemed to be (and now its confirmed) a double bottom.ÿ The first bottom occured after "black Monday". Tuesday, October 28, 97, the intraday low on the nasdaq was 1465.84....then we rallied into dec. On Dec 19,97, the nasdaq hit an intraday low of 1486.23...maybe the double bottom....but it wasn't. There was one more test on Jan 12, 98.ÿ the intraday low was 1465.61, only 0.23ÿ of a point below the low set on oct28,97.... a statistical quirk when you look at the fast markets that were occurring those mornings. For the record, here are my 1998 calls in the Dec 31st newsletter : <<OK here's my picks for 98... Long Bond hits 5-1/4 to 5-1/2 range by late summer. Nasdaq hits 1800 by early summer. Dow stays stuck in a trading range below 8700 and above 7000. Rusell 2000 hits 510 by the fall.. Asia begins to recover by the fall.">> Theÿ consensus estimate for the Dow 30 have come down in the past 4 weeks...usually not a good sign but this number fluctuates.ÿ Currently, combined earnings of the dow 30 for 98 is expected to be $465.09 ...(four weeks ago it was $477.88).ÿ So the dow is trading at a 17.6 p/e on 98 earnings.ÿ If the market gets back to its euphoric ways, it won't be out of the question to see the dow p/e reach 22 or so....so the Dow may indeed reach 10,230 this year IF everything goes smoothly...that's a big IF.ÿ Given this maybe, it wouldn't be a bad idea to move the 8700 target upwards...so I will...to 9300.ÿ (10,000 may happen if the coming rally turns into the ultimate blowoff). The best scenario would be a gradual gain to 9300 throughout the year...if indeed the blowoff scenario happens, the ensuing correction could be brutal....but let's not discuss this yet....it is good however to keep this in the back of our minds in the coming months. OK...you want a few more positives.... 1.ÿ the new lows on the NYSE have been below 40 for five straight days as of today....this hasn't happened since last October (or maybe September...I gotta check that) 2.The week of 1/16/98, NYSE Members were net buyers of 15.954 million shares.... 3. the volume over the past week has been very impressive especially the up volume to down volume comparisons. Here's to a good week. Paulo (paulo@edgenet.net) PS....if you like what you read, check out www3.edgenet.net