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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: donald sew who wrote (8558)	3/20/1999 2:27:00 PM
From: Elroy Jetson	Read Replies (3) \| Respond to of 99985

"Barrons" 3-21-99 Going With the Flows - Interview With Laszlo Birinyi Q: Obviously, a lot of people have problems with the narrowness of the advance, with the fact that the vast bulk of stocks still trail the S&P 500. Should we use any rally over 10,000 to get defensive? A: No. The narrowness of the market is not unusual. What is unusual is how aware we are of it. In 1998, 50% of the gain in the S&P was in 13 stocks. And 20 stocks were 61% of the gain. Last year we took an in-depth look at data starting from 1965, the first year the S&P data are available. We eventually entitled our research "The Case Against Indexing," for obvious reasons. Back in 1965, to our great enlightenment, the two largest stocks in the S&P in 1965 -- AT&T and General Motors -- equaled the bottom 330 stocks. The S&P 500 is a market-weighted index. If Microsoft and General Electric and IBM go up, an awful lot of stocks can go down and the market can still be ahead. In fact, the market capitalization of the Russell 2000 is not equal to the market's capitalization of those three stocks. The reality is that this is the characteristic of the market today. All of a sudden, we have more knowledge about the market, more awareness about how it works, more sources of information. Lack of breadth is not of great concern to me. It's just the latest thing for those who have missed the market to be concerned about. The stock market isn't democratic. It doesn't matter how many stocks are up. It matters which ones. All it's describing when it's narrow is that you have to be very careful about what stocks to buy. If the market is broad, it tells you that perhaps asset allocation is more important. Q: Let's talk about stocks. What's showing strong money flows right now? A: The strong sector is still technology. With IBM, Xerox, Apple Computer, Texas Instruments, there's really no change there. No. 2, a lot of financial stocks. Foremost among these is the brokers. That's a real plus for the market. Here, Charles Schwab, Merrill Lynch, Morgan Stanley would be the first names. Followed by Donaldson Lufkin & Jenrette.

To: donald sew who wrote (8558)	3/20/1999 4:27:00 PM
From: yard_man	Respond to of 99985

I like the SOX donald for a weak sector. It has broken decisively through its 50 dma and has spent the week trying unsuccessfully to break back above it. Good alignment of both technicals and poor fundamentals -- i.e. weakening PC sales and profitability. INTC's pentium III is a flop so far. I like LLTC as a proxy for the SOX. Chips should get hit first, I would imagine. INTC on a good up day would be another prime candidate, IMO.

To: donald sew who wrote (8558)	3/20/1999 8:51:00 PM
From: Mad2	Read Replies (2) \| Respond to of 99985

Don, I would suggest focusing on computers, and sectors that will slow ahead of Y2K. General consensus is the computer software followed by the computer hardware stocks will suffer recessionary demand in the business sector during the later half of the year as companies are expected to divert their IT budgets towards testing and programing with little time for buying/managing new hardware. Puts on IBM/DELL and anyone who serves the corporate IT market with big ticket items (except maybe EMC???) should pay handsomely. Manufacturers can be expected to finnish the year strong as a hedge against logistic troubles. Most everyone I talk to instead of working inventories down at year end, will be looking to finnish the year with adequate stocks as insurance. Slowdown in techs and unemployment amongst software programers during the 3rd and 4th qtr, followed by a correction during the 1st qtr of January should be enough to spook the consumer into thinking we might be heading for the great depression. Formula for a contraction in consumption and recession starting in the 4th qtr of this year, leading to lower interest rates and a recovery in the 2nd qtr of 00. BTW I'm not sure I'd bet against paper and cyclicals as a strengthening in Asia or the perception of a slowing US economy (weakening dollar) should help those sectors, techs should be a easier target I guess is the point