Stock Forecaster Deals in Specifics, August 8, 1998
NEW YORK (AP) -- The stock market decline will continue into early October, paring 26% from earlier highs of the Dow Jones industrial average and 40% from Nasdaq stocks.
You can accept this forecast for what it's worth, but you should know that some of the market's biggest institutional investors pay big bucks to obtain it, and that the analyst who came up with this prediction has often been uncannily correct.
That analyst, Robert S. Morrow of Bradenton, Fla., proprietor of the High Tech Growth Forecaster, stated in June 1987 that the DJIA would peak at 2,700 in August. It peaked at 2,722 that month.
Morrow began warning a year ago of a major decline in the market to occur in June of this year. Since then he has been refining the timing; earlier this year he saw it beginning in June. He concedes his error.
In the past decade he has never been averse to going public with specifics. One explanation for specifics rather than generalities is that Morrow is a scientist by training, a stock market analyst by extension. As a scientist, he holds 37 patents, most of them involving wave analysis.
Years ago he began applying understanding Fourier analysis, such as in the vibrations created by aircraft wings or emitted by turbines, to the study of stock market behavior. The marketplace, he found, produces its own unique wave patterns that, when understood, can be just as readily read and interpreted. As such, Morrow seeks guidance from the market itself rather than from the economy.
These are specifics of his forecast as of Aug. 6:
--The Standard & Poor's 500-stock index, which reached a high of 1,187 July 17, will fall to 875 by Oct. 11. The decline from its high: 26%.
--The DJIA, which reached a high of 9,338 points on July 17, will decline to 6,885 by Oct. 11. A decline of 26%.
--The Nasdaq composite index, which reached a high of 2,014 July 20, will drop to 1,221 in October. A decline of 40% from its 12-month high.
While Morrow believes it is too early to make a definitive forecast of how long it might take for the averages to retrace their lost ground, he offers a preliminary estimate of 10 months.
He concedes that the precision of his forecasts may be affected by the 401(k) phenomenon.
The 401(k) or mutual fund or pension effect, which has developed largely over relatively recent years, has added a new dimension to the signals emitted by the market, mainly involving the actions of new investors who have poured billions of dollars into retirement accounts.
Without a history to study, it is difficult to know how these small investors will react to price changes that endanger retirement plans or margin calls on investments made possible by home equity loans.
While Morrow's forecasts are short-term bearish, some good news might be dredged from them:
--Sharp as the market's decline might be, it would leave the DJIA and the S&P just 4 % below their past 12-month highs.
--There are likely to be interim advances that interrupt the decline.
--There might be some relatively safe havens. Morrow names, in order of security, capital goods technology, financial institutions and utilities. Perhaps gold stocks too because of their undervaluation.
Long-term investors might choose to wait out the decline, avoiding commissions and capital gains taxes. How short-term investors react might involve more critical decisions, such as those involving liquidity.
Because of faith in his analysis of wavelengths, and because of the utter impartiality of it objective information, Morrow has little fear of going on the record far in advance, even if his timing may be off.
To do so is the exception. Last week, for example, several brokerage house analysts were lionized for having issued ''forecasts'' of a sharp correction that already had begun.
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So far his call has been pretty good. Does anyone has access to Mr Morrow's research and do you recommend it? I found this ad at dickdavis.com |
