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Strategies & Market Trends : LastShadow's Position Trading -- Ignore unavailable to you. Want to Upgrade?

To: Dave Shares who wrote (8003)	2/8/1999 8:58:00 AM
From: LastShadow	Read Replies (1) \| Respond to of 43080

The Week Ahead (from Briefing.com) Tech Sector After advancing by nearly 80% since October 8, the Nasdaq Composite finally showed signs of running out of gas last week. Money flowed out of the group into laggards such as paper, chemicals and steel. Briefing.com expects sector to continue correcting over the next week or two, as group leaders such as Microsoft (MSFT), Cisco (CSCO), Intel (INTC), Applied Materials (AMAT), Dell (DELL), America Online (AOL), etc. remain overextended technically. Earnings anxiety brought on by warnings from Advanced Micro Devices (AMD) and Newbridge Networks (NN) triggered the long-awaited correction. With little in the way of good earnings news left to reverse market sentiment, the path of least resistance will remain to the downside. Interest Rates Strong economic data, once viewed as essential to the sustainability of the rally given the correlation with earnings growth, now being seen as a threat to the rally. Current valuations predicated, however loosely, on notion that rates would remain low and inflation dormant. Based on a series of stronger than expected economic reports, street beginning to question how much faster economy can grow without rekindling inflationary pressures. Market also beginning to contemplate possibility that Fed's next move will be a tightening and that it could come sooner rather than later. Consequently, strong data likely to viewed as a negative for stocks - at least over the near-term. Briefing.com isn't in that camp yet, as we still believe strong economic data is good in that it is necessary in order to produce anywhere near the profit growth that the market anticipates for this year. Meanwhile, the threat of inflation still seems remote. Nevertheless, when the market is richly valued as it is today, there is no room for uncertainty. With rates at the high end of their recent trading range and no major data due this week, market could see some relief on the rate front. However, any bond gains likely to be limited - especially if dollar remains soft against the yen. Earnings Not much left, at least not as far as market movers are concerned. Only company that remotely fits that category is MCI/Worldcom (WCOM) and it doesn't report until after Thursday's close. Given that steady diet of better than expected earnings news was a large contributing factor to market's relentless drive higher, it will be interesting to see how market fares without its daily fix. If late last week was any indication market likely to have the shakes for at least a little while longer. For a full list of those companies due to report earnings this week, see Briefing.com's Earnings Calendar. Internal Dynamics Market internals remain lousy. Weekly advance/decline line never confirmed market's rally to new highs. Worse yet, it continued to trend lower. The number of new lows expanded as well. Never a healthy sign, particularly in a market near the highs. Last week also saw the percentage of bearish advisors slip to just over 28% while the percentage of bullish advisors remained over 60%. With so many bulls, who's left to drive prices higher from here? Finally, the Dow Jones Utility Average (DJUA) broke through pivotal support while the Dow Jones Transportation Average (DJTA) rolled over before coming anywhere near establishing a new high (again failing to confirm DJIA's record run). Conclusion When you add the poor market internals to the breakdown in the tech sector, the lack of market-influencing earnings news and the increasingly uncertain rate picture, the outlook for the week ahead isn't great. We're not looking for anything awful mind you, but it still looks too early to "buy the dip."