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Technology Stocks : C-Cube -- Ignore unavailable to you. Want to Upgrade?

To: Tim McCormick who wrote (36634)	10/11/1998 10:10:00 AM
From: Rarebird	Read Replies (3) \| Respond to of 50808

The Bull Market Has Ended: The technical deterioration of the U.S. stock market is now complete, with the divergence between small stocks and their large cap brethen showing their greatest disparity since the " Nifty Fifty " behavior of 1973, just before the worst bear market since the Depression. The number of new highs vs. new lows, as well as the advance/decline line, demonstrate a sharp ballooning of the number of issues which are continuing to increase in value, along with an irrational ballooning of these issues' P/E ratios as was the case in 1973. Essentially investors were crowding into the fewer and fewer stocks which continue to rise, thus bloating their values well beyond what is justified by these companies profits. It is fair to say that the stock market has been traded as a commodity market. One interesting parallel between 1973 and 1998 is that in both instances there were virtually the same tiny number of issues which were continuing to show technical strength. One notable difference is that today's " Nifty Fifty " are showing an average P/E Ratio which is 50% higher than at the inflated 1973 peak, suggesting that these large-cap beloved brand names are almost certain to lose about 90% of their value over the next decade after adjusting for inflation. With a current dividend yield not even competitive with a decent checking account, the market will find it difficult to remain flat for any extended period of time, as recent events have demonstrated. Although there have been a number of sharp rally days in the Dow over the past several weeks, they have been strictly limited to fewer and fewer stock groups, as well as fewer and fewer stocks. The famous rotation patterns of the mid 1990's have disappeared as no stock groups have been able to undertake the leadership role typical of a healthy bull market. There is an indicator that I learned when I studied finance that determines the onset of a Bull or Bear Market. If the Advance/Decline ratio is 2:1 or greater over a two week period, then the trend has changed. This is what happened during the last two weeks of July: declines swamped advances. A New Bull Market will be in place when we see advances beat declines by more than a 2:1 ratio for a period of two weeks. Till that time, be careful. The trend is Very Bearish.