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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank -- Ignore unavailable to you. Want to Upgrade?

To: LastShadow who wrote (7119)	4/5/1998 10:09:00 AM
From: Oral Roberts	Read Replies (1) \| Respond to of 120523

Being a neophyte I have tried not to litter your site, but, a stock that I have owned in the past, and am back into now seems to be getting ready to go so I ask, is ATML really going again or have I lost my mind? You guys are all great and now I will go back to absorbing! Jeff

To: LastShadow who wrote (7119)	4/5/1998 3:23:00 PM
From: Robert Graham	Read Replies (4) \| Respond to of 120523

Large inflow of European money has been a significant factor since the beginning of this current market rally, both for stocks and bonds. The Asian situation helped promote this direction for foreign money in its search for a "safe haven". That is why even though institutions have pulled their money from bonds to reenter the stock market, after an initial drop in the bond market, bonds have firmed up and for example the long bond has maintained its interests rate below 6%. The foreign money is replacing part of what has been taken out of bonds by the local institutions in their efforts to reinvest their monies back into the stock market. As far as stocks are concerned, you must of recognized the different trading pattern exhibited by the major indices this market rally, and their uptrend despite the selloff by the institutions of the high techs, the key leadership of previous market rallies. Remember this trading pattern for future reference. This trading pattern has been an ongoing and overt signal of accumulation on a very large scale. I remember seeing this before years back in previous markets. When you have this much money coming into the market, it will float many boats. Also large money cannot afford to chase a rally up. So the institutions like the fundies wait for market selloffs to purchase stock. That is why throughout this rally, market setbacks have been minor even when the technicals were calling for a more major retrace. Foreign money for the most part is interested in the "blue chip" types of stocks like those that make up the DJIA, names that are commonly recognized like GE for instance. But much of the foreign money are more interested in our bond market. Most investors in Germany for instance are for the most part bond holders. Our own institutions have been focusing much more attention on stocks outside of the small collection of DJIA stocks. That is why the S&P 500 has been catching up and in some respects surpassing the performance of the DJIA. For that matter, with this much money to place, the small group of stocks represented by the Dow would be a poor place to attempt to place all that money, particularly when there are other stocks of companies that do not have as high valuation placed on them by the market. The technicals are very helpful, but without an overall perspective of what is actually occurring with the fundamentals of the market, particularly money flow, technicals alone at times can lead you to false conclusions as you have already seen this year. I was very surprised that you pulled your money out anticipating a major correction in the market when the market fundamentals were simply not there to support such an observation. Please note that market fundamentals that I speak of are not the same as the fundamentals of the companies that make up the market of traded stocks. In other words, as long as you have allot of money looking for a place to go in the market, which is a positive market fundamental, the overall high valuation (P/E) of the market is meaningless, which can be considered a negative fundamental, particularly considering the evident slowdown in earnings being experienced by the S&P 500 collection of companies and the knee jerk reaction by the analysts in the form of downgrades. Earlier in the earnings season I suspect Asian market fears helped motivate their downgrades for the Asian problem would show up best in this quarters earnings reports, not the last quarter. IMO this market currently is being driven primarily by money flow and a continuing positive economics like low inflation and high employment. A rosy economic picture indeed. Original fears of a slowdown to the economy have been alleviated by recent economic reports and an earnings season that has not fared as badly as some suspected, so far. So the market participants think that there will be money to be made somewhere with an economic backdrop like this in place. Market sentiment, another very important part of the overall picture, is positive and at times showing new levels of speculative exuberance with speculative money moving into high tech stocks that report significant earnings disappointments. The speculative element which is essential for a sustained rally has in part been off trying their hand at the smaller caps. This is why the small cap indices like the Russel 2000 have been making new 52-week highs. The quality of the speculator's participation in the market even though helpful has not made the same difference on the market as it had in the past. This has been primarily a money flow driven market. IMO once market leadership in some form has been reestablished, then the speculators will enter the picture in a different way playing those stocks. Meanwhile, it looks like they have been giving industries like the drug stocks a run which can lead to the biotechs having a bull run of their own. I am not going by technicals in making this statement but from my understanding how market players can behave. As far as earning plays go, IMO this will continue to change in character and become more difficult to make money this way in the same returns that were seen using this approach in the past. This is due to in part to the reported earnings slowdowns and their associated earnings warnings which have been in place for several quarters now. Also another factor is the techs are not providing the same leadership in the market as they have even in the previous bull run even though some market players are still there not realizing that the music has stopped for some time now. A look at one's equity curve should of been very revealing over this period of time. One result of this situation is that many now looking for those "starry eyed" returns are forced to move to the smaller chip stocks which indeed are more speculative and trade differently since they are much more illiquid. The interest in small cap stocks have made some trade in a more liquid fashion, but this can change very quickly. Also it is just this type of stock that does well toward the tail end of a major bull market cycle. For that matter, making earnings plays and only being able to take the long side of a position is not enough to be able to make money trading full-time in the market. Many pro traders that I have met would not consider such a limited trader a professional in the markets as I am sure the future of this bull market will prove. At least your scans for "fundamentally sound and beaten down" stocks help broaden a trader's capability in making money in the market long after "earnings plays" become out of vogue. But this will not help you in a longer term downturn (selloff) in the market. Full-time traders need to know how to play both sides of the market very well which is an essential skill that helps the player adapt to a changing market. Food for thought. Bob Graham