to all:
Last week, the Dow Jones Industrial Average was up 320.05 points to 10493.89 (+3.15%), the Nasdaq Composite was down 109.01 points to 2484.04 (-4.20%), the S&P 500 was down 29.35 at 1319.00 (-2.18%) and the Russell 2000 index of small cap stocks was up 15.72 to 421.58 (+3.87%).
For the year, the Dow is up +14.29%, the Nasdaq up +13.29%, the S&P up +7.30% and the Russell 2000 down –0.09%.
The Small Caps outperformed them all. Wednesday's special report was to alert readers that signs of the beginning of a small cap rally were evident. Thursday and Friday seems to have confirmed the signals. First off, it is clear that small caps are being accumulated. On any pullback the Russell 2000 was rebounding. Further evidence is in the expanding positive breath over the past week.
During the week, the NYSE Cumulative A/D line made a nice move upward. It now sits at 49,129. New lows on the NYSE have been over 40 for 61 consecutive days now, however, the number of new highs has exceeded the new lows for 6 consecutive days, the first time that has happened since early January. The number of new lows have been decreasing during the week, down to 41 on Friday. What is ironic about the week is what has happened to the tech leaders (but should be of no surprise to StockMotions readers). The techs had a horrible week. Indeed the slowdown mentioned last week does seem to have caused a drag on next quarter's revenue projections. Intel confirmed that on Tuesday. Sun Microsystems reiterated the sentiment late in the week.
On Friday, Fidelity reported that they have scaled back on their technology holdings and have picked up more financials and energy stocks. This is in synch with what I think is going to be the new leadership in the coming months. The perception that the recent run-up in oil prices is that the run-up is going to be sustainable. The perception that the rest of the world is recovering financially is giving a footing to the small cap story.
What does all this mean?
It looks as though the small caps and the energy stocks are getting ready to play “catch up”. And with the type of market environment that exists today, it can very easily happen in very quick fashion. For example, take a look of this week's charts on some of the cyclical stock's charts, like Caterpillar and Boeing. They can very quickly be up 10% or more in a matter of a few days.
Which takes me to the oil service stocks mentioned last week. After meandering through Wednesday, giving those who wanted “to buy on weakness” a chance to do so, these stocks took off on Thursday and Friday. As a matter of fact, ESV looks as though it has broken through some very tough resistance in the mid15's and did it on heavy volume. Yesterday, I read on one of the Internet drilling threads that some had shorted the likes of SLB, expecting it to back off. Let me say that the atmosphere towards these stocks has changed. The perception is that oil has rebounded and the rebound is for real. SLB, HAL, etc. are the “big winners” that funds managers are familiar with and are willing to pursue. To ignore this is foolish. It may retreat a bit, but it could also start the week with another rush of fresh cash chasing it.
If indeed the rest of the market makes a move up and joins the ranks of their big cousins in valuations, then what? In other words, is this just part of a final push in order to make everything expensive or is this the beginning of a sustainable bull market in the small caps and the energy stocks. I'm sure I'll be visiting these thoughts in the coming weeks.
Earnings Season Continues
Last week, E*Trade Group was mentioned as the one to watch. Early in the week, it and other Internet brokerages were on fire. They finally started to come back to earth later in the week. The sector rotation was one reason. Another may have been that a few of the Internet companies reported LOWER than expected earnings and flattening revenues. If that becomes a trend, look out below.
This week, the big money center banks report their earnings. BankAmerica reports on Monday, Citigroup and Chase Manhattan report on Tuesday. Technology powerhouses report on Tuesday, also. EMC and Microsoft also report on Tuesday. Incidentally, EMC had one of its worst weeks in years. It dropped about 20% last week. IBM will report on Wednesday. Many of the tech stocks have experienced meaningful corrections late Wednesday through Friday (while at the same time the small caps and the oil stocks were getting the benefit of the money flow). MSFT, EMC and IBM have the power to resurrect them, however, given the warnings looking forward by some of the big players already, it may be premature to do any bottom fishing….certainly a better picture will be in hand by Wednesday night.
The Major Moving Averages
For those of who are interested in the moving average levels, here they are. As of the close on Thursday, April 16, 1999: The Dow's 200 day MA is at 8969.20, its 50 day MA is 9716.9. The 200 day MA is in an uptrend and the 50 day MA continues its uptrend. The Nasdaq 200day MA is 2033.10, and its 50 day MA is 2406.70. The 200 day MA is in an up-trend, however the 50 day MA showed signs of flattening on Wednesday and Friday, this bears watching. If any reader would like to see the charts that indicated the relative movement of the 50 day MAs on the Dow and the Nasdaq, please click on
stockmotions.com for the Dow and
stockmotions.com for the Nasdaq.
Where does the market stand?
Last week I mentioned that “We are definitely in for a telling week!”. Well, that was an understatement. It looks as though a change in leadership in underway. How long it lasts and whether it is sustainable will be the focus of future newsletters. For now, enjoy the movement in the small caps and the energy stocks. By the way, if any reader is thinking of picking up a small cap stock or an energy company, MAKE SURE they are on solid ground. If a stock has been beaten up because of poor performance and sour fundamentals, don't buy it….it is usually best to stick with the proven leaders!
On the Website
Each week, I update the charts on the website to include the data through the close of Friday. I will always try to have the updates by Friday night. Please visit the website at stockmotions.com to view them or to sign up for the FREE newsletter. The charts are a supplement to the newsletter – please feel free to use them.
Paulo
Copyright: 1999 StockMotions.com
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