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

To: Kerry Phineas who wrote (17435)	4/27/1998 5:00:00 PM
From: MJR	Respond to of 94695

News from Reuters... INSIGHT - U.S. stocks seen shedding up to 10 pct By Richard Jacobsen NEW YORK, April 27 (Reuters) - U.S. stocks were in the grips on Monday of a pullback that could eventually squeeze 10 percent off the major indexes while not breaking the back of the bull market, technical analysts said. The move would drop the Dow industrials to about 8300 over the next four to eight weeks, off its peak of around 9200. "I would say the ingredients are there for a further move over the coming weeks on into the mid- or lower-8000 range," said Ricky Harrington, technical analyst at Interstate/Johnson Lane. On Monday, concerns that the Federal Reserve may be leaning toward raising interest rates sent Wall Street shares tumbling. The Dow Jones Industrial Average in early afternoon trading was off 200 points, or 2.2 percent, at 8862. This year's rally drove the Dow from its closing low of January 9 at 7580 to a peak of 9185 last Tuesday, a gain of 21 percent. Technicians said the pullback was overdue after such as steep rise and a recent deterioration of the market's technical background. This deterioration included a decline in the number of New York Stock Exchange issues hitting new highs, despite the major indexes moving to record peaks. This meant that fewer and fewer stocks were participating in the rally, said Ken Tower, technical analyst at UST Securities. Bearish sentiment, as measured by Investors Intelligence, had reached its lowest level in six years, another sign of a near-term top in the market. "Greed had really taken over from the fear that was so evident in the (autumn) last year and that suggested to us that you were near a short-term peak," Tower said. INSIGHT - U.S. stocks seen shedding up to =4 Fundamental issues including rising interest rates in the bond market and concerns over a slowdown in corporate profits also made the market vulnerable to a pullback. Jonathan Dodd, technical analyst at Morgan Stanley Dean Witter, noted an immediate downside target for the Standard & Poor's 500 index at 1070, with the next support level around 1030 to 1040. The S&P 500 was off about 29 percent, or 3 percent, at 1079. Several stock groups are particularly vulnerable to corrections after big runups, Dodd said. These include pharmaceutical, financial, airline and automobile stocks. INSIGHT - U.S. stocks seen shedding up to =5 "A lot of these groups can correct quite a bit and still be in their overall uptrends," Dodd said. The American Stock Exchange's pharmaceutical index .DRG was off 19 points, or 3 percent, at 606. The exchange's broker-dealer index .XBD fell 27 points, or 5 percent, to 523. The Dow Jones transport index .DJT was off 130 points, or 4 percent, at 3427. The S&P auto index .SPAUTO fell 12 points, or 3 percent, to 411. Analysts, however, said they did not see grounds for a pullback much larger than 10 percent nor did they see any signal the longer-term bull market was nearing its death. "Again, my definition of correction here is short-term and this correction is in the context of a long-term bullishness," Prudential Securities chief technical strategist Ralph Acampora said. He said he expected stocks to pull back between 5 percent and 10 percent, with the Dow still reaching 10,000 during 1998. Key to the duration and depth of the correction may lie in the bond market, analysts said. Rising long-term interest rates cause the market to appear increasingly overvalued in analysts' models. "If we get to over 7 percent in the bond, this is not going to be a minor correction," Dodd said. The 30-year Treasury bond was off 1-25/32, pushing its yield up to 6.08 percent from Friday's yield of 5.95 percent. REUTERS Rtr 15:10 04-27-98 Copyright 1998, Reuters News Service