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

To: Tommaso who wrote (15214)	3/22/1998 5:56:00 PM
From: P.Prazeres	Read Replies (1) \| Respond to of 94695

More thoughts.... March 22, 1998. Last week, the Dow Jones Industrial Average was up 303.09 points to 8906.43(+3.53%), the Nasdaq Composite was up 17.50 points to 1789.16 (0.99%),the S&P 500 was up 30.55 at 1099.16 (+2.86%) and the Russell 2000 index of small cap stocks was up 5.48 to 474.25 (+1.17%). Wow, what a run... If you're wondering what a blowoff looks like, this might be it...but outside of that most of the indicators that I look at on a weekly basis haven't pointed down...which to me is quite incredible. On the NYSE, the new highs were 372 on Friday (looking for the peak to produce something in the 400's)...volume swelled to over 841.6 million shares, the new lows were mostly in the teens during the week (23 on Tuesday). The up volume was consistently better than the down volume...in other words, its not just the Dow stocks that are cranking higher...many of the others are going along for the ride. Utility and Telecom indices were up 4.5% to 5.0% this past week alone. The Investors Intelligence Sentiment Index for 3/18/98 edged down a bit to 48.0%. Last week it matched the peak reached in early October of 97. Over the past few weeks, I've written about what is needed to keep the market at these lofty levels... 1.) rates to continue trending lower, that's looking ok. 2.) inflation needs to remain in check...some are saying its zero. 3.) earnings need to expand....this is causing some concern. The consensus estimate for the Dow 30 stocks took another hit this past week. It now stands at $457.51, which I believe is the lowest it has been for 1998. Yet, the index continues to climb. Certainly, the takeover speculation of JPM has tacked on some extra points to the index and Coke's shoot over the past week is quite puzzling...but JPM earnings were lowered over the past week...they are expected to have 10% earnings growth from 98 to 99 and Coke, its simply been crazy to short it. The Dow stands at 19.47 times it estimated earnings for 1998...that's assuming that all goes well from now to the end of the year. On its trailing 12 month earnings, it is at 22.9 times earnings. The S&P 500, on the other hand is a t a p/e ratio of 27.64. For some of the big gainers in these indices, nothing can go wrong from here forward...otherwise the cut will be on the individuals that do announce trouble will be severe and swift. This is one of the reasons I tend to stay away from these stocks in times like these. Which leads me to the oil service sector.... The newsletter started to mention favor towards these stocks about one month ago. Last week, it was getting pretty ugly in this sector, but it really seems that the bottom has been found (last Tuesday)...and for those of you who were bottom fishing and stayed the course and were patient, tomorrow may continue to be rewarding. This weekend there was a oil production agreement between the OPEC and non-OPEC nations in Saudi Arabia. It calls for up to a 2 million barrel per day reduction in the production of crude. According to a brief article in Barron's this weekend, the current oversupply is about 2 to 3 million barrels. Some of the stories on the wires today mention that the initial agreement may mean a $1.00 pop in oil tomorrow, with more to come as the final details of the agreement are announced. Here are some links to some of the stories.... biz.yahoo.com biz.yahoo.com biz.yahoo.com biz.yahoo.com The newsletter also mentioned that the airlines may be in for some selling, especially if oil turns around. It will be interesting to see what happens to this sector tomorrow. HEY, what about the techs.... Too many of the big tech companies are calling for a slowdown....this sector will not provide any substantial upside in the near future....and it seems that there has been some rotation out of this sector and into others. STOCK OF THE WEEK All I will say is that if anyone is thinking of how to play the oil services sector...look at those that are outperforming the rest of the group...GLM, ESV and RIG are two that come to mind. Paulo www3.edgenet.net