Highlights from Las Vegas
05/23/2003 12:00 am EST
The arguments for a bull market - or at least a significant bullish phase - are hard to disregard. Indeed, the mood in Las Vegas, from both advisors and investors, was more optimistic than we have seen at Money Shows in several years. From a contrary standpoint, this one-sidedness towards a bullish posture may suggest we are nearing a pullback to reduce some of the excess bullishness. Regardless, it has been a long time since we have read such bullish reviews of the market, and below, we share some of these optimistic outlooks.
Chuck Carlson, editor of DRIP Investor, titles his latest issue, "Bullish Pieces Falling Into Place." He highlights potential tax relief, favorable interest rates, low inflation, the relatively positive results in Iraq, and cheaper oil. His summary: "Where do I come down on this market? I think the reasons to be bullish out-number the reasons to be bearish. This market has gone through a tough three years and is due for a bounce. True, stocks may not be as cheap as they were during previous market bottoms. However, history shows that waiting for 'rock botttom' prices usually is the wrong approach. Bottom line- if you have been reluctant to put money into this market, now is the time to put some investment funds to work in stocks."
Carlson is also a contributing editor to the 57-year-old Dow Theory Forecasts, edited by Richard Moroney. Dow Theory, in fact, has a market strategy named after it - under this theory a bull or bear market is defined by closes above or below a certain level determined by the market's previous action. He now says, "When an over-bought market continues to rally, it suggests investors are discounting genuine improvement in business conditions. With several indicators suggesting the market is due for a pullback, a near term move above 8931.68 in the Dow would be a bullish development and confirm the market's primary trend as bullish under Dow Theory. It would also suggest that any pullbacks should be viewed as buying opportunities."
"I feel more optimistic now than I have in two years, and believe that the last ten months have been a cyclical low," says Prudential Securities technical director Ralph Acampora . "Part of the reason for that is the new emerging leadership is basically technology. And I believe when you have growth stocks leading it shows confidence coming back into the market. If we’re trying to be anticipatory about the next move, I would say that any market hesitation here is a buying opportunity. Nevertheless, the market is in need of a near-term correction—a time when the current imbalance between supply and demand gets re-aligned. This process could take several weeks to complete; in the meantime, we do not expect the market to make new lows nor do we expect the intermediate to long- term positive momentum to change—in other words, this near-term correction is a normal pause within the base formation that began in July. In fact, the more time this basing process takes, the better it likely is. Thus, what is happening near-term should actually be very healthy for the market’s longer term outlook."
"One of the problems that preceded this bear market in 2000 was that as the market was making new highs the most broadly based of the measuring tools – the advance-decline line – was getting more and more narrow," says Ralph Bloch of Raymond James & Associates. "That kind of scenario is a recipe for disaster. Think about it. The market keeps going up, led by fewer and fewer stocks. That cannot continue and it was the primary technical precursor to the bear market that followed. We now have the exact opposite situation. Since the October reaction low we have two sources of leadership. Number one is the advance-decline index. It has outperformed the Dow in nothing short of spectacular fashion. So we have a mirror image situation. Breadth lagged at the top; it is now acting very superior into the bottom. And last, but not far from least, the technology stocks, which is my guidepost for a healthy stock market – we cannot and will not have a strong market without technology leadership, and within that area, I give a tremendous amount of weight to the SOX, which covers the semiconductor industry. So we are seeing the exact opposite of the bearish conditions and the internal strength of the market is growing. I would hope to see the market move a little sideways for a while. The longer the base, the healthier the breakout will be when it occurs."
"Talk about risk aversion," says fundamentalist Ned Riley of State Street Global Investors. "The public’s risk aversion today can be measured in the $800 billion they have put into savings accounts in the last two years. It can be seen in money market funds. Risk aversion can be seen in them buying bonds for the future. Now they are not alone. They are following the lead of the analysts on Wall Street who really don't know any better. I hate to be this critical, but the majority of those analysts grew up in the 1990s with the wind at their back, everything was beautiful, and I don’t think they know how to come out of a bear market, I don’t think they know how to come out of a recession, I don’t even think they know what cyclical leverage is in earnings and profits. It’s going to once again be time to buy and hold, and it's going to be the shorts and traders chasing stocks all the way up the street."
"I agree with the economists who look at the long-term problems in the US, like the cost of healthcare, Social Security – that huge, enormous, off-balance sheet item that we have," says John Dessauer, editor of Investor's World . "Unless these problems are solved in the next three or four years somewhere between here and there this economy starts to grow a whole lot more slowly than we would like. But in the meanwhile, we have a huge opportunity. The perfect storm is coming together. The dollar is down, interest rates are down, corporate profits have risen for five consecutive quarters. Corporations are generally lean and mean and any increase in demand will lead to an increase in profits, which leads to rising stock prices. Long-term rates are the final piece of the story, and we are going to see an economic spurt with GDP growth probably on the order of 5% for one year. If we get that, then all the stocks you can think of to buy are going to make you money. But make your money on this run, because there are no guarantees that we will solve the long-term problems."
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