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

To: Moominoid who wrote (926)	8/1/1998 9:13:00 PM
From: Les H	Read Replies (1) \| Respond to of 3339

a snippet from Barron's re: Lowry's BP indicator: Hoping against hope that we're misreading the symptoms (granted, a not-unheard-of occurrence), we turned Friday to Lowry's Paul Desmond, one of the best market diagnosticians extant. Paul's expert reading of the market's pulse has kept followers of Lowry's proprietary Buying Power and Selling Pressure indexes on the right side of the market through most of the bull's long romp -- with remarkably few of the head fakes that typically bedevil technical types. He wasn't reassuring. Lowry's gauges of market supply and demand crossed on Tuesday, never a great sign. But what has Paul really concerned is the weak market background in which that crossing occurred: 'It's almost like the difference between catching a cold when you're in basically good health and when you're really run down. The former is no big deal. But in the latter case, you may very well end up with pneumonia. And that's what is happening here. The market was really run down.' Which very much wasn't the case as recently as June, Paul notes, the latest previous instance in which the Lowry's indicators threatened to cross. In fact, because a whole host of other technical signposts still looked strong at that point, Paul correctly predicted yet another new high in the Dow. This time 'round, his prognosis is far more grim. "The past two circumstances in which we've seen these kinds of divergences and this sort of sharp loss of buying enthusiasm coupled with this degree of selling were in 1987 and late 1972-73," he says. Whether we're in for a waterfall decline, more drawn-out torture or some dreadful combination of the two, Paul can't say. He admits, though, to being powerfully worried about "the incredible lack of liquidity in the market -- even the biggest blue-chip stocks are now highly illiquid, in that institutions are holding enormous quantities of stocks. At some point, they are going to want to sell. But there is nobody left to sell to." Similar standoffs in the past, Paul says, have taken, oh, maybe nine months to resolve. Knocked 35%-40% off the Dow, more off the less blue-blooded averages. And, not coincidentally, created great opportunities for investors flexible enough to survive. So everybody ready now-bend! There's an interesting article at smartmoney.com about an extended bear market if it hits index funds with liquidations. They have a lot of unrealized cap gains. Some of the mutual fund holders could be hit with cap gains taxes on top of losses. This would depend on the fund and how it manages redemptions and selling of stocks.