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Strategies & Market Trends : Point and Figure Charting -- Ignore unavailable to you. Want to Upgrade?

To: Bwe who wrote (5151)	7/28/1998 8:51:00 AM
From: wizzards wine	Respond to of 34811

<<OT>> Interesting reading regarding the current market conditions: Summer rally collapse fans correction fear in U.S. NEW YORK, July 27 - Call it the La Nina reversal. Weeks ahead of schedule, the summer rally in U.S. stocks has stalled, giving rise to a heightened sense that a significant and perhaps protracted downturn may be in store. Investors have grown accustomed to a rhythm in the U.S. stock market, one marked by seasonal Santa Claus and summer rallies and punctuated by the occasional October correction. This year's summer rally, which carried a handful of stocks and large-cap indexes to new highs in June, has collapsed on itself after failing to draw broad market participation. Now, just as the El Nino weather phenomenon always gives way to its opposite, dubbed La Nina, Wall Street gurus say the aborted summer rally appears to be giving way to a reversal. ''This should not be a bear market but it should be the most significant correction since the October break in 1997,'' when the Dow fell 554 points in one day, said Joseph Barthel, chief investment strategist at Fahnestock & Co. "Dow 8000 is probably in the cards," he added. Many of the strategists forecasting a downdraft, including Barthel, are not new entrants to the cautious camp. Morgan Stanley Dean Witter chief global strategist Barton Biggs in late 1997 said he expected a bear market in U.S. and Europe stocks in 1998 and said on Monday that event may be at hand. Biggs on Monday cut back the portion of his model global portfolio allocated to U.S. and European stocks. He declined to be interviewed on the shift but in a note to clients explaining his allocation shift said, ''I believe that we may have entered a cyclical bear market in the U.S., which could see the market go down 20-30 percent over a period of months or quarters.'' To be sure, not all the news is negative and few see a full-fledged bear market at this point. Interest rates, a key support mechanism for stock prices, remain historically low. And money continues to flow into U.S. equities both from mutual funds and international institutions. Despite those positives, there is ample evidence a correction is already in the works and any short-term upswings, such as Monday's late blue chip burst that lifted the Dow industrials (^DJI - news) 91 points to 9,028, should be viewed as a chance to prepare for the next down move, some analysts said. ''The best you can hope for in the next couple of weeks is an anemic near-term rally and then we'll start falling sometime in August again,'' Barthel said. Weakening fundamentals have stripped many sectors of their momentum. Economic growth has stalled in the U.S. and earnings growth has weakened among U.S. companies, with profits only barely exceeding reduced analysts' estimates. Many technical analysts point to the fact that market breadth is deteriorating anew after failing to recover to its early April highs. The New York Stock Exchange advance-decline line, a measure of broad market health that charts the aggregate number of gaining stocks versus falling ones on a cumulative basis, entered a downward trend on Friday, April 3. The Dow industrials first pierced the 9,000 level on April 6, the following Monday. Since then, the market has taken on the characteristics of a funnel, with buying interest forcing high-speed advances through an ever-narrowing opening.