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Strategies & Market Trends : The Stock Market Bubble -- Ignore unavailable to you. Want to Upgrade?

To: Roger A. Babb who wrote (26)	4/23/1998 10:39:00 AM
From: Moominoid	Respond to of 3339

At last some sanity on SI. On the conventional dividend basis the market is way overvalued. On the basis of earnings (and using CAPM) the market might not be that far off. The trouble is that valuing shares on earnings leads to disequilibrium where stockholders don't in fact receive the returns that they paid for. Forgetting the really crazy stuff like Amazon look at MSFT. As the profit growth rate slows from 50% to 30% to 20% the PE is rising. This can't keep up on any basis. My current strategy with US stocks is long on undervalued (on earnings basis) low beta stocks - Apple, National Semiconductor, Kelly Services, Chase Manhattan, Globalink and short on MSFT which is an overvalued high beta stock which at least I have some understanding of. I figure the amount I might lose now on MSFT is being more than offset by those other shares, but in a crash or correction MSFT will more than offset the losses on the others. My average MSFT price is $92 (now $96) but my average price on Apple is $15 (now $28). Still I'll be likely to cover MSFT on the first reasonable dip (which seems underway). On a bullish note: Last October my TA model showed a sell signal within a week on all stocks I was following (and the SP500 index). It's not so clearcut at the moment. David

To: Roger A. Babb who wrote (26)	4/23/1998 11:21:00 AM
From: Les H	Read Replies (2) \| Respond to of 3339

Buying of gold stocks has been usually precedent to stock market dips and corrections. This is one of the longer rallies, almost a month. Last April and September, gold rallied prior to decline in market. It 's indicative of speculation in the market. In terms of cyclical patterns, the market has been in a 10-15 week cycle for bull runs (except for 1995 which came after a 9 month bear market). The current run reaches 15 weeks in first week of May. There is also a shorter monthly cycle that peaks next week. This is the third up-wave since the January lows, completing the five wave pattern. However, the market is still working on forming the first top (a reference point) for this run. Typically, the second top occurs 4-8 weeks after the first. In that interim period between tops, divergences occur and negative momentum appears. You need momentum to turn negative such as weekly MACD and RSI (both of which are now in overbought territory). By the second top, they are trending down. The dollar and the interest rates seem to have completed their trends and may reverse. A strong GDP report next week may be the catalyst for pushing the bonds over 6%.