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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: J.T. who wrote (26548)	5/26/1999 3:40:00 AM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

JT-- Great post, but I am unable to find justification to issue a 'bear call' like Acompora did and was unable to cover until 1740 on Comp was hit, my disdain for P/E ratios is well known this market moved from Jan 95 to may 99 500 to 1380 without any regard of P/E ratios, it will still not regard P/E ratio as important indicator. It is growth factor IBM or MSFT INTC cannot be treated like ordinary steel or utility stocks, nor can internets or AOL be valued based on P/E ratio. The traditional approach valuation is valid for traditional sectors, for non-traditional sectors PEG would work fine, it has so far and market is at these levels based on NDX PEG forecasts, if this tool of valuation is discarded we would never had this rally from Jan 95 at the first place, the concept of SPM trading 35 times P/E makes a lot jitters but growth stocks which dominate S&P like CSCO EMC MSFT IBM will and have always traded at a huge premium to the market, since these also have become now global leaders we need a little rehashing of our tools to treat their P/E's in light of their penetration and global presence, knowledge based economy will have new frontiers of valuations. 2- Market finds it levels, we have as you very correctly pointed out excess on up and downside like 1310 test was a two year low on Comp or 1000 test on NDX last 8th Oct, you will see that whilst these tests were in process we had forecasts of DOW at 5000 or some other silly levels, between two extremes lies oasis of stability, to search for this nirvana of investment I look at short term supports and resistance, if 1292 refuses to break no way we can go down, we need two solid breaks on this support this is a key support, it took a lot of time for market to break this and so would be 1230 and 1130 support. I will not be surprised if this is taken out solidly today, if you look at the earnings some of these stocks have been ripped off all extra fat, like EMC is one that I follow and NOK the other, I can see that at 85 but to sell it to that level we need some big time shorting and if SPM cannot be taken out at 1292 the momentum on sell side may not come, for NDX to break big towards 1740 area we need initially PSE breaking 500 475 SOX breaking 372 350 and going to 330 for big dip, I don't see that present earning backdrop caters for such steep drop, I would think that divergence is clearly visible, we have Techs beaten down aggressively whereas DOW has not budged I would like restoration of order here, rather Techs as I have maintained all along should rally from a support and cyclical to weaken, I don't see much room below 65 for MER nor I see C below 55, these stocks are may be good buys likewise BKX below 800 is another buy. 3- I avoid very much a big sell on the market or a huge buy for me opportunity is the name of the game, somewhere as we try to find support we will have one nice number that will wash out CPI worries, a bounce and possibly a dip but I don't see next CPI confirming previous number. 4- A rally will be in offing if inflationary worries are offset. In background of non-existent wage pressures and stable commodity prices and a huge gap between output and capacity, the threat of inflation may be bit overblown, for a long term bear market it has to inflation rearing its ugly head, in such a case we can see far greater correction over longer period the first sign would be inability to break overhead resistance on two closing day basis. 5- With Global economies still under pressure it is good occasion for US to take a breather, it carried the load of the whole global economy for far to long, may be some 'deflated asset prices' will help arrest demand and hence the possibility of harnessing consumer price index, these movements of markets not only write off excess liquidity but create with higher bond yields a market tool to slow down demand. 6- I think that in between extremes of overbought markets and huge sell off lies the true market value, at 1130 this becomes a beauty to own at 1430 a sell, for traders between these two extremes lies land of opportunity, if one sets his mind on huge sell off than he is still looking for that huge break at 1310, I know threads who were buying puts at 1310 in Oct 98 and this lost of opportunity is something which a day trader cannot excuse. I try my best to avoid it, sometime I am little early but it always pay buying outside the money calls at the lows and forgetting them, you very rightly say it may not bounce but probably it will because we have not gone through a fundamental change until that happens we will se rebound, if PPI CPI and other stream of numbers next month confirm CPI of April, I think you will see a much steeper and longer correction. A 30% shave of US markets will erode 1.5% from global GDP that kind of correction will feed on itself.