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

To: Gersh Avery who wrote (11712)	7/10/1998 11:10:00 AM
From: Robert Graham	Read Replies (1) \| Respond to of 42787

Good observation on the earnings driving the current price action of the market. However, this will soon pass and fundamentals need not take back the drivers seat. I think the swings in the market is more based on sentiment which the fundamentals can influence from time to time. What I think happens is that over time the underlying sentiment of the market may change. It can get to the point where all that needs to happen is for a news item to come out for the market to break the way of the change in sentiment. Even if this series of earnings announcements undermine market sentiment, changes in market sentiment is a process. Down the line, which need not be a long period of time, it will take a news event to reflect this sentiment in the market prices. What is interesting is that this news event does not need to be significant or even that relevant in order for this to happen. Sentiment and how the market responds to sentiment is indeed a funny thing. Definitely is responsible for the inefficient pricing that we find in the market. As far as the current market situation goes, I think what we are seeing is the market at a transition point and the associated nervousness that we are likely to find. This is being facilitated by the mixed to negative earnings announcements. Here we have stalled about 50 points above the 9000 magic number with a recent pullback to this value from what looked to be a continuation of this rally. This is a common price area right above a "magic number" like this where the market can stall. Some are asking themselves "what happened to my expected profits?'. "We should be shooting straight up from here". Looking for a reason the trader will attach more value to the earnings announcements. This will feed into their nervousness and help some continued profit taking. If the market pulls back below 9000 and after successive tests remains below 9000, then I think market sentiment will be in the position for further selling. A market rally that in part was being led by the very speculative stocks like the Internet group is a rally that is undermined from the start. For that mater, market internals never became very positive during the rally even though for a short period of time it looked like they were improving substantially. Now that we have seen profit taking in the speculative market "leader" by the funds, expect as Judy has stated a rotation of fund money. Also I am not surprised that the market would soften at this point. Of course this is easy for me to say this upon reflection after the fact. So goes my thinking right now. Any thoughts or comments? Bob Graham