Thanks Juli. This is what I found on Pru's site, dated Feb 8th.
prusec.com
Looks the same as what I posted before. However, we
don't know if the entire commentary was posted today or
some of it having to do with the stock market correction
has been there for a while.
We need to monitor his site within the next few days
on daily basis to determine if he does change
his commentary on daily basis.
Also, here is the whole gang!
prusec.com Market
Clint
brought to you by Ralph Acampora
Chief Technical Analyst
For additional insights to the financial markets,
order the latest Investor Weekly or check out a list
of all publications that can be ordered on-line.
February 8, 1999, 10:40 a.m. EST
Prices as of close on 02/05/99
U.S. Stock Market Outlook
Near-Term
Over the past several weeks we highlighted in
this section our concerns about some
technical near term problems like: negative
breadth, too much bullish sentiment and the
very poor price action of the Dow Utility
average. Today we want to add three more
technical difficulties that could have a negative
impact on the market's near term outlook:
NYSE volume is running over 800 million
shares per day with no appreciable
upside increase in price momentum.
This is what technical analysts call
churning. And after a huge price
advance since the October 1998 low,
this activity can be construed as
distribution or topping.
Stock splits are abounding—this is
usually a late cycle phenomenon.
The tech stocks are, on balance, under
pressure. Even after last week's
drubbing, many of these issues are still
too spiky and could drop another 10% +
from current levels before encountering
their respective major uptrends or
significant support levels.
Rotation is sweeping across the tape.
The recent leaders are under near term
pressure while the one's that basically
lagged the market over the past several
months are quickly becoming attractive.
For example, the cyclical side of the
market is holding up well: e.g. steels,
papers and some energy names. On the
other hand, financial issues are
beginning to flounder, like banks and
interest sensitive sectors:
Stocks that are rolling over in price
range are:
Philip Morris (MO—46 1/8, is not rated
by Prudential Securities Research)
VFC Corp. (VFC—41 1/2, is rated
‘STRONG BUY” by Prudential Securities
Research)
State Street (STT—68 1/2, is not rated
by Prudential Securities Research)
First Union (FTU—49 1/8, is rated
‘STRONG BUY' by Prudential Securities
Research)
Mellon Bank Corp. (MEL—65 3/8, is
rated ‘ACCUMULATE' by Prudential
Securities Research)
National Semiconductor (NSM—11 /38,
is not rated by Prudential Securities
Research)
Issues that seem to be enjoying positive
investor interest—money appears to be
rotating into these names:
Kellogg (K—39 5/8, is rated ‘HOLD' by
Prudential Securities Research)
Allergan (AGN—79, is not rated by
Prudential Securities Research)
Clorox (CLX—120 7/8, is rated
‘STRONG BUY” by Prudential Securities
Research)
Weyerhaeuser (WY—56 1/8, is rated
‘ACCUMULATE' by Prudential
Securities Research)
McDonalds Corp. (MCD—80 5/16, is
not rated by Prudential Securities
Research)
USX US Steel (X—28 1/4, is rated
‘STRONG BUY' by Prudential Securities
Research)
We are concerned about the near term market
outlook—the above shifts in groups, stocks
and indicators suggests to us that a normal
correction is currently unfolding. We define
normal as a decline in the range of 5% to
10%. We don't think that this is unreasonable
in the light of the fact that so many huge gains
were realized since the market's low
registered in October, 1998. But this normal
correction could turn ugly if interest rates
become a problem short term.
The yield on the 30 Year Treasury is currently
testing its downtrend that has been in force for
about two years. If rates were to rise above the
5.4% level it could mean an eventual rise to
5.7%. If push came to shove, a rise to 6%
could also materialize. In any event, a bigger
rise in rates over the near term would likely
have a negative effect on the overall stock
market. Our proxy for interest rates is Federal
National Mortgage (FNM—68 15/16, is rated
‘STRONG BUY' by Prudential Securities
Research). This stock has critical support at
the 67 level. If FNM breaks below 67, then
equities would be saying to the world that they
expect interest rates to rise over the
foreseeable future.
When was the last time we had a 6% interest
rate environment? In early 1996, the bond
market came under pressure and rates went
to 6.4%. The Dow dropped 4.5%. in a few
days. About a month later, the Dow dropped
again but this time it was a 5.3% decline. All in
all the secular bull market remained in tact
despite the near term rise in rates. Rising
rates caused only a near term correction.
On August 4, 1998 we dropped the word
“stealth” and said that a ‘cyclical bear market'
had begun. We felt then that the Dow Jones
Industrial average would join the NYSE
breadth and both would move lower. Today we
are reintroducing the word “stealth” into our
vocabulary because we DON”T think that the
Dow will join the sagging NYSE breadth
dramatically lower. There is rapid rotation
within the DJIA itself. For example, last week
the leaders within the DJIA, stocks like
International Business Machine (IBM-165 3/4,
is not rated by Prudential Securities
Research), General Electric (GE-98, is rated
‘STRONG BUY' by Prudential Securities
Research), General Motors (GM-85 15/16, is
not rated by Prudential Securities Research)
and Hewlett Packard (HWP-71 15/16, is not
rated by Prudential Securities Research) were
being sold off while the money was rotating
into the laggards within the Dow such as,
Boeing (BA-37 1/16, is rated ‘HOLD' by
Prudential Securities Research), Caterpillar
(CAT-46 1/4, is not rated by Prudential
Securities Research), Chevron (CHV-78 7/8,
is rated ‘ACCUMULATE' by Prudential
Securities Research), etc..
We see less risk in the DJIA because it has
fewer technology components. The S&P 500
and the NASDAQ Composite outperformed
the Dow on the way up from their October
1998 lows but, for the same reason, the Dow
is expected to outperform these two
barometers during any near term correction.
What is the Dow's current risk? We still
believe that we are in a secular trending bull
market. And any sell off is deemed a normal
near term correction. Our primary support is
still 9087.72 and our secondary support is
8676.03. These levels confirm our 5% to 10%
near term range. However, our message is
different because of the group rotation and
shifts taking place (e.g interest rates, etc.).
This is a stock pickers market—be very
selective when making investment decisions
in the equity arena.
Prudential Securities and/or its affiliates have managed
or co-managed a public offering of securities for First
Union Corp, Federal National Mortgage, General
Electric
Intermediate Term
The rotation taking place under the surface is
critical at this time; it appears that investors
are more willing to take new positions in
cyclical names. This is normal, especially if
there is growing concern about the direction of
interest rates. Read our comments above
about interest rates.
Today, Prudential Securities analyst Frank
Ponticello spoke about smart money insiders
(value buyers) who have been concentrating
on the following areas: airlines, chemicals,
containers and packaging, metal fabrication,
steel iron ore and construction equipment.
This insider input fits neatly into the recent
rotational activity between the sectors. Use
these observations as a starting point when
making investment decisions over the next
several weeks.
Long-Term
This is the time of year that we provide our
friends at the popular weekly TV show, Wall
$treet Week With Louis Rukeyser, with our
new year stock picks. For 1999 we selected
eight names for the next twelve months; this list
includes large, mid and small cap issues to
reflect our belief that 1999 will be a broad
based affair in which stock picking is most
important:
Ralph Acampora's 1999 Wall $treet
Week With Louis Rukeyser's Stock
Picks:
Compaq Computers (CPQ-45, is rated
'STRONG BUY' by Prudential Securities
Research)
Intel Corp (INTC-130 1/8, is rated
'ACCUMULATE by Prudential
Securities Research)
Microsoft Corp. (MSFT-159 7/8, is not
rated by Prudential Securities Research)
Pfizer Inc.(PFE-131 9/16, is rated
'HOLD' by Prudential Securities
Research)
Liposome Company Inc. (LIPO-14 3/4,
is not rated by Prudential Securities
Research)
Texas Instruments (TXN- 96, is rated
'ACCUMULATE' by Prudential
Securities Research)
Platinum Software Corp.(PSQL-11 5/8,
is not rated by Prudential Securities
Research)
Taco Cabana Inc. (TACO- 9 1/16, is not
rated by Prudential Securities Research)
Prudential Securities Incorporated makes a primary
over-the-counter market in the shares of Intel Corp,
Microsoft & Platinum Software.
Our 1999 Stock Market Outlook—The Year Of
The Stock Picker...
Our 1999 yearly range for the Dow
Jones Industrial Average is 7800/8450
on the downside and 9800/11,500 on
the upside. The S&P 500 range is
1050/1090 on the downside and
1350/1525 on the upside.
October 1998 was the bottom and
represents a four year low.
The year 1999 is the third year of the
president's term in office and the third
year is historically the best of the four
years.
Past performance is no guarantee of future results.
There is no assurance that the forecasts will be
attained.
Back to Top
Sector Standings
Click here to see a graph of what the top ten S&P
500 groups and bottom ten S&P 500 groups did for
the last 5 days.
Attractive stocks for today:
CBS Corp. (CBS-36 1/8, is rated
‘ACCUMULATE' by Prudential Securities
Research)
Georgia Pacific (GP-71 5/8, is rated
‘STRONG BUY' by Prudential Securities
Research)
Nucor Corp.(NUE-48 3/4, is rated
‘ACCUMULATE' by Prudential Securities
Research)
US Steel Corp. (X-28 1/4, is rated ‘STRONG
BUY' by Prudential Securities Research)
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