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Strategies & Market Trends : From the Trading Desk -- Ignore unavailable to you. Want to Upgrade?

To: Steven Bowen who wrote (2650)	3/5/1998 10:50:00 AM
From: dpl	Respond to of 4969

> The traders here should love the volitility, < That's the name of the game.Why be afraid of a day like today? Use it. David

To: Steven Bowen who wrote (2650)	3/5/1998 6:18:00 PM
From: Robert Graham	Respond to of 4969

Please comment on the following: Intel is one of the leaders of the market besides that of the tech sector. INTC in known as a "bellweather" in the stock market. When a company like Intel dumps, there will be obvious market-wide repercussions. This comes on the tail of a market rally that has been eroding and predictably is going through a retrace toward former levels. Toward the end of this rally, most of the action was to be found in a handful of tech stocks which to me indicates a high degree of speculation. DELL is an excellent example of this. Speculation without the support of the big money cannot sustain a rally. However, the S&P appears to have been doing better. The tech sector has been the market leader for some time now. Where the tech sector goes, the market follows. In this case there was a delay. This temporary decoupling of the market from its leadership was a good sign that the market rally would not sustain itself. Also I think this indicates there is more at play here. Perhaps there is a sector rotation away from the tech sector which is now becoming very visible. A series of quarters with earnings warnings which did lead to earnings disappointments has not helped, along with other issues in the background like the Asian problems and now a break of bonds above the 6% yield mark. Would you believe there are still people making the earnings plays in this market? Amazing. Talk about unnecessary risk taking. Now we are heading into earnings warning season in about another couple weeks which may have the market revisit another series of earnings downgrades and slower growth stories and Asian issues. The difference is a higher long bond yield which will focus market concerns back onto the economy. The upcoming earnings reports is when we will ba able to see the real toll the Asian problems have had on American businesses. I am sure many other businesses will continue to use this as an excuse for a markdown in their own earnings picture. Oracle did this. Each successive market rally has seen less high-tech participation. This tells me that the institutional money has been more inclined over time to move their money out of tech stocks as a sector even though they may still play individual tech stocks. This does not bode well for the market since the market needs leadership. The question becomes what sector and industries will take on the leadership role in the market. The S&P has been showing good strength relative to the DJIA and NASDAQ, so money is being moved to some place. Since the institutions have been buying into market dips, the DJIA and NASDAQ have shown unusual resilience except recently. We also have the foreign money helping to float our indices, in particular the bluechip stocks represented by the DJIA. So there is still market liquidity in the form of large amounts of money available to be used to purchase stock from both institutions and foreign investors. Because of this, I do not think we will be seeing a major correction here, and I will be very surprised if the DJIA revisits our old high and in particular closes below 8300. Place yourself in the shoes of the institution. They were not eager to move into the market until a bottom had formed. Then they began accumulating stock. First published evidence of this was in the box makers. They were accumulating amid the exhuberance of the speculator. They are attempting to move in large quantities of money which can work against them by helping prices move up. So during this last rally, they needed to wait until large supplies of stock became available to purchase which happens during selloffs in the market. This is why the dips in our indices were not sustained and showed unusual resilience. However, when this market selling continues over a period of time, I as an insititution would want to wait before making any additional purchases to see where the market is heading. I may still focus my efforts in areas of the market showing continued strength. This is what may be happening. Another possibility is that we are seeing the results of the funds moving money from the tech sector to other sectors. Perhaps that why we have been seeing the NASDAQ dump while the DJIA remained afloat. Eventually the DJIA did predictably succumb to the weakness in the NASDAQ index. If this is true, then where are they moving their money to? If the techs will not provide leadership, then it will take time for other industries to take its place. Any ideas on this? So getting back to Intel, as you see there is more than just Intel as part of this picture. Intel is just a more broad brush stroke of the developing picture that can help portend what may be coming up for us in this market. This is why Intel's earnings disappointment and the stock's selloff needs to be considered seriously by those who are trading in the markets. Comments? Bob Graham