Bulls Vs. Bears: A New Digest Feature
11/29/2002 12:00 am EST
Where’s the market going? In this issue we introduce a new column which will appear on an ongoing basis, in which we turn to the leading market forecasters for their latest opinions on the direction of stocks, bonds, interest rates, and the economy, as well as their outlook for specific markets such as energy, real estate, and gold. Here are some highlights in the ongoing debate between the bulls and the bears.
“From a long-term perspective, we suspect that a generation of investors is being killed off. They were pulled into the equities markets by the extraordinary return of the late '90s and they are being driven from the equities market by the terrible returns of the 2000s. They are moving en masse into cash, bonds, real estate, etc. Meanwhile, we suspect that the economy is not in anywhere near as much trouble as it is said to be and suspect that the surprise will not be a second dip, but stronger growth than anyone expects. From a seasonal perspective, we are well into the best time of the year to own stocks and the positive influence will continue well into next year. Couple that with positive monetary, fiscal, and tax policy and the stock market is going to have a hard time going down.” John Bollinger, Capital Growth Letter
“Technically, we are seeing the formation of negative rising wedges in the many of the broader market indices. The prior instance of this occurring was during the July-August period – a period when these patterns led to significantly lower prices; multi-year new lows, in most cases. Meanwhile, sentiment has become too bullish. Hence, we are negative and we are becoming more so by the day. We look for lower prices in the days, weeks, and months ahead.” Richard Rhodes, The Rhodes Report
“My long-term bearish scenario for the market remains intact. Nevertheless, the fundamental backdrop has started to look friendlier. Money fund assets have soared, setting up some nice potential buying power. The biggest fuel for further gains will emanate from what could be a massive reallocation by the big boys out of bonds and into stocks. I see a huge surge in bullishness as this market continues to climb in December, culminating in a veritable orgy of ‘buy now ahead of the huge 2003 rally’ stories in the financial media. But by mid-January the rally should end. By then, most of the sidelined money will have been sucked in to the market for the next downleg.” Bernie Schaeffer, The Option Advisor
“It is widely anticipated that early next year, the new Congress and the Bush administration will eliminate double taxation of dividends. Already some companies are raising their dividends in anticipation. That would be a huge event, worth 2,000 points on the Dow. Eliminating double taxation of dividends will cause dividends to rise, and the market will rise with it. Rising bond yields will cause more money to go into the market, so I feel very, very comfortable right now that the market has bottomed.” Louis Navellier, Blue Chip Growth Letter
“We are now between a bear and a bull. It would be lots more fun if we could say for sure which of these fighting critters is about to win. But we’re in a twilight zone. The old stock market decline isn’t quite ready to give up for good, and the new rally hasn’t yet blossomed into a sustainable uptrend. We’ll know soon enough which force is stronger. In the meantime, I’m boosting our reserves of cash and short-term bonds this month to 35% of the model portfolio. In the twilight zone, you want to play it safe.” Richard Band, Profitable Investing
“The Amex Brokers Index, an early stock market indicator, has led the market higher, breaking to a new recovery high. Leadership by the brokers is a sign of the market’s near-term health. The NASDAQ 100, which has been leading the rally from the outset, continues to confirm the new highs. Weakness in this sector would have represented a serious dent in the bullish case. However, since this Index continues to perform admirably, higher near-term prices are being signaled.” Martin Pring, Weekly Intermarket Update
“While it is difficult to imagine, Iraq will be no more prominent in the news by mid-2003 than Afghanistan is now. The President’s focus will shift to the economy. Look for another tax cut to stimulate economic growth, the 2001 tax bill to become permanent, and a reduction of the capital gains tax. You can expect Bush to do whatever is necessary to get the economy humming long before November of 2004. The next five years will be the most exciting and profitable period that you and I have ever experienced." Donald Rowe, The Wall Street Digest
“The stock market is saying that invasion or no invasion, Iraq's oil is going to find its way back into the market somehow, and that production will bring oil prices down to the $22-$25 per barrel levels, which is a net positive for the world economy. The slow, grinding recovery is going to gather steam from extremely positive geopolitical, monetary, fiscal, and political triggers that are hitting our economy. The trickle of good news will turn into a stream and then a river as corporations with highly reduced overheads run into new demand that really juices earnings growth.” Tobin Smith, ChangeWave Investing
“The least likely expected scenario is a severe market correction that takes the major stock indexes to new low. But I keep looking at the gap under the market around 7950 in the Dow, nearly 1000 points below the current market. I feel the market is currently vulnerable to a correction, and any continuation of the rally at this time would make the state of the market progressively more dangerous, setting up a bigger reversal to the downside. My strategy is simple. I'm short. The potential of a 1000 point (if not greater) decline from top to bottom over the next few weeks is a distinct possibility.” Mark Leibovit, Volume Reversal Survey
“Seasonality and the third year of the presidential cycle favor the longs. The old saw ‘Buy in November, go away in May’ has particular relevance following the off-year Congressional elections. Buying the NASDAQ at the end of October in 1974, 1978, 1982, 1986, 1990, 1994 and 1998 and selling at the end of April has produced average gains of 27.65% for the six-month period.” Kevin Kennedy, Coolcat Explosive Small Cap Growth Stock Report
“We will continue to maintain a fairly high cash and income position, because we know that uncertainties still abound. The 'Age of Terrorism' is very much alive, and will continue to wreak havoc from time to time in the U.S. and around the world. I still favor our 60-30-10 combination: 60% stocks (both U.S. and international), 30% cash/high income investments, and 10% natural resources (gold and oil). In today’s uncertain climate, it pays to be well-diversified.” Mark Skousen, Forecasts & Strategies
I’m seeing smart money in the bond market selling on rallies and not doing a whole lot of buyi...