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Strategies & Market Trends : The Thread Formerly Known as No Rest For The Wicked -- Ignore unavailable to you. Want to Upgrade?

To: Tim Luke who wrote (9649)	1/24/1999 11:20:00 PM
From: puborectalis	Read Replies (1) \| Respond to of 90042

Not reigned in yet Indicators show continued bull run But correction would be useful to rebalance valuations By Elaine Garzarelli, CBS MarketWatch Last Update: 3:02 PM ET Jan 23, 1999 Also: columns & opinion NEW YORK (CBS.MW) -- The market took a break this week from hitting new highs. Concerns about Brazil, Alan Greenspan's speech and valuations caused the major indexes to head a bit lower. Our indicators -- at 63.3 percent -- suggest a continued bull market (an indicator level of 30 percent or lower suggests a bear market). Valuation concerns We are concerned about the high level of valuations, but valuation is only one of our 14 indicators. This is the reason our model is not registering a higher composite level. We would become more concerned if interest rates were to remain at these levels while the stock market continued to move higher. A correction would be healthy and is necessary in order for interest rates and earnings to catch up with stock prices and increase our indicator reading. We believe that interest rates will decline and that this, in turn, will help the higher valuation levels for the stock market, even with the slowdown we see in earnings this year. Our forecast remains for a Standard & Poor's 500 level of 1400 and a climb to approximately 12,200 by the Dow within six to 12 months. We believe corrections, as measured against the S&P 500, will be limited to a decline of less than 10 percent from that index's all-time high of 9643.32. Interest rates and bonds There was volatility this week in the bond market due to strong economic data and Greenspan's comment that it is difficult to find many signs of economic slowing. We believe, however, that bond yields will decline further due to lower inflation and the continuing budget surplus (the federal budget is balanced for the first time since fiscal 1969). We have no reason to believe inflation will accelerate -- especially with the Journal of Commerce industrial price index hitting an 11-year low and the onset of the euro creating more price competition between European and American products. Our bond model suggests a 10-year bond yield of 4 percent. Elaine Garzarelli is a columnist for CBS MarketWatch. You can get more information at her site -- garzarelli.com. Search our news archives: (For more options use our Advanced search) TickerKeyword