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Strategies & Market Trends : Stock Attack -- A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Chris who wrote (6916)	3/17/1998 1:11:00 PM
From: jmac	Read Replies (2) \| Respond to of 42787

I have been trying to move a little out of tech. MRK is good today as is HI. I am looking at FDX and CCI. I give up on my Global Marine--its dead money for at least a year.

To: Chris who wrote (6916)	3/17/1998 1:45:00 PM
From: Robert Graham	Read Replies (2) \| Respond to of 42787

This pullback should not of been at least a surprise to anyone considering that yesterday ended up with significant gains in the market that has eroding leadership. Note once again the weak tech leadership. The market rallying on what Warren Buffet says tells me that there is no real leadership in this market. The market needs leadership to sustain a rally. If there is no strong leadership, then the market will look for leadership. In this situation, the market can respond to transient news either positively or negatively depending on the markets bias at the time of the news. Clinton's "zipper" news stories can plunge a nervous market. Warren Buffet's pronouncement of current "fair" valuations can encourage a bullish market into a small rally. But effects that this type of "leadership" has on the market is only very fleeting. Still, the market has showing its usual resilience to selling. As we are entering another earnings season, I think there are a few important items to note here. First, if the techs will not be providing the leadership the market, then there will need to be another leader to take its place. This can take time to develop. However, the market still can make its gains but the strength will not be there as in previous bull runs that had strong leadership. The gains can still be there because of market liquidity: large amounts of money looking for a place to go. This IMO is what has been happening in the market. Do not forget the monies from foreign investors still entering our markets. This type of market player is usually interested in our bonds, which can in part explain the drop of the long bond yield back below 6%. Also some foreign investors are interested in our stocks, but they tend to invest only in familliar names of solid blue chip companies. There have been and will continue to be industries in the market that will do well. Second, note what exactly Warren Buffet said. This guy is a very intelligent and sly investor. He said that the market can support its current valuation as long as companies can continue to deliver their strong results in earnings growth and also if the interest rates remain low. Recall a statement that he made not too long ago that stated he thought the market was to a large extent overvalued and he would not recommend any investment in today's market. He appears to have changed his posture regarding the markets. A closer examination of this IMO reveals a different observation. Anyone who has been following the market lately can see that the first qualification of his statement is not true considering the recent proven decreasing trend in earnings growth, particularly of the high techs. This started with the techs and their earnings warnings which turned into earnings disappointments and an Asian story to support the decrease in earnings. This pattern still appears to continue during this earnings season. We will see soon enough. What is Warren doing instead of investing in stock? He is now playing the commodities market which goes against his low interest rate outlook. Also there was news in the past that came out indicating that he has been buying corporate bonds. Given what I see unfolding, I tend to believe this rumor. I do not see Warren taking a positive posture in the market that would convince me that he believes in a continued rally. I think Warren in looking for opportunites to move some of his money out of this market. Now he is now creating those opportunities for himself by breaking his own rule by keeping publically silent about the market. Warren is very careful with what he says and how he says it. He needs to consider the money he has at stake. When he was selling part of his stake in Wells Fargo and the news leaked out, he denied what he was doing. This allowed the price of the stock to firm up so he can continue selling the stock. When you have a person like this act out of character and take a more aggressive and short term motivated stance in the markets, even appearing to change his long term investment strategy, there is something that has changed. But one thing will never change: that is he will always protect his own interests ahead of everyone else. If you had over 15 billion dollars at stake not including other people's money he is responsible for, I think you would too. By the way, I am not suggesting that Warren is dumping his holdings in the market. But something is up here, and it is not his bullishness in this market. As a short term approach to the market until the earnings season in behind us, I would take your profits in the tech sector and stay with very short term trades. A more defensive posture is worth prusuing at this point as we move into the earnings season. I do not see a market correction coming, at least from the news and information I have been able to pick up in my present albiet less active participation in the markets. However, there may be surprises in store for some traders. IMO this is one earnings season it will not pay to hold into the earnings announcements. I think it would be smart to take quick profits leading up to earnings. You can always jump back in as a trader after the earnings on a company is released. Look carefully at the earnings announcements of some key companies in the industry and also their forward statements provided in the conference call.. I do not like the risk to potential profit profile that I am seeing right now. The bigger picture of the market will be more clear after this earnings season. Take a hint from Briefing: "Briefing suggests securing some profits from tech gains at this time as a group has run up too far, too fast amid a backdrop of negative earnings pre-announcements from industry leaders such as Intel, Compaq, Motorola...as earnings season draws closer, we expect the underlying bullish tone to change quickly". Furthermore, there has been evidence that the market has been fueled lately in part by a large speculative component. Recently the market has been blowing off earnings warnings. The Asian fears may come into the picture again if this will be another season of earnings disappointments. Any comments form those who have been playing this market? Bob Graham