first majestic silver

Around the Clubhouse Turn?

March 24, 2000

Consecutive all-time high closes . . . was our forecast for the cash S&P Tuesday and as well on Wednesday, handsomely capping-off a series of sometimes challenging forecasts dating way back to the end of February, which we viewed as the "exhaustion low" for the non-tech big-caps, as clearly outlined in that month's Letter, and almost daily here in the Daily Briefings. We're very pleased so many investors have profited by not panicking during the conclusion of the downtrend that began almost two years ago in the blue-chip (non-technology) stocks, and for the overall big Senior Averages that dated from basically New Year's Eve. We don't know that this overall thrust up won't run into trouble for one reason or another coming up in the near future (presumably, a certain distinguished gentleman sitting in a large institution in Washington having some impact in the monetary fields, is rumored to be less than happy with the market's response to his moves).

Then as they went parabolic, we had to call for correction, particularly in the Nasdaq 100 (NDX), which was delivered. I suspect the surprise to many investors was that we didn't think it would be a big break; just a correction. And we thought that Tuesday's early weakness had at least some possibility of being a secondary test of the low of last week, hence the corrective leg ending and a test, after the rally up following the essential double bottom back in January of this year. As to why we thought the NDX would bottom; it's simple. A few stocks have an inordinate impact on it; especially our Intel (INTC) and a few others, and we're still very bullish on our PC stocks for '00.

Now certainly there are things that can come along to derail this marvelous market and forecasts of course. However, while delighted the moves occurred, we're becoming less enthusiastic daily, at least a tad, as others belatedly panic into the market, because essentially they simply missed or misjudged this enormous move. To them it's dismissed as "wacky" or something, but it isn't. It just required (reserved methodology discussion) to conclude what was happening, and to lean against being bearish, when people were talking about bear blue-chip markets or bear T-Bond action, while all the while we shook our heads and said, "what are they talking about; the blues already crashed; they can't do it again, and the bonds have been in a new bull market for months already, so everybody knows bonds (bulls for months) are leading, not lagging, indicators, right?"

The Clubhouse Turn?

So, all we have to say is nothing that has happened this year (overall) has been unexpected. It is not an aberration, and this is the way markets work. The mass of emotional players respond to a very exhausted Dow Jones Industrial decline by selling near the lows, while we warned about it; the mass of emotional consumers respond to high Oil prices when Oil was getting ready to fade, as only the lagging gasoline prices gave the illusion that that trend was ongoing; while a majority of media act as if interest rates are going up on Fed hikes, when the norm is for long-rates to go down, because the Fed is hiking, and because it's well along in the series of such funds hikes. Of course to us these calls have been fairly wild, but actually slightly orthodox. The Street seems to think these market contrary moves are wacky and unorthodox in the face of the Fed rate hikes.

To which we say they are nothing of the sort. That doesn't mean something doesn't change this, or that as all the managers now scramble to pay-up to get back in that it doesn't lead to a sharp decline say maybe (as a forward speculation, must be a reserved discussion); but it does mean that, barring pestilence, war, famine, or margin rate hikes (actually all are not out of the question, though we hope they can be avoided), dips may be limited within macro uptrends, coming off a potentially major bottom for the blue-chips in February, as outlined at the time (more reserved).

During this same time, our views remained very interesting on the divergent NASDAQ sectors as we thought money would pile-into technology favorites (it did) for awhile, then they would have at least a normal sizeable correction from a parabolic move up (they did), making what we viewed as a potentially important low last week, assessed as a "test" by pressures early Tuesday a.m. If so, then there is some prospect (as noted on the hotline during the weakness) that downside in fact ended, just as many others were becoming concerned about it. This is not yet a monolithic market, but (readers) know our views on that subject going forward. And you know what lies right near the very heart of this upside enthusiasm, which has been lots of fun recently (especially as we were more optimistic about comebacks in the S&P than the typically most bullish strategists anywhere on Wall Street). Now they're back to increasing their targets, after the cash S&P has broken out as forecast, and after Oil eased a bit, as we forecast it would while it induced angst.

If you ask if that means we're heading towards a "perfect world" condition; no, we're not going to get that excited about the market. At the moment it looks remarkably like that, but for many stock sectors prices remain high, and the maneuvering has to be fairly careful with one eye on the exit doors, just in case. Outside of that, and the realization that the market is overbought on at least a daily basis now (hence subject to periodic profit taking), we remain intermediate term optimistic, as we have since the last trading day in February, and through all the sometimes stressful twists and turns that consumed much of the forecast rangebound struggle between 1380-1420 until we broke-out solidly, in the expected manner, which was an upside bias for that resolution. Boy was it, and we're delighted, as our technical projections back at Feb lows counted all the way to most bullish numbers (above here; far forward calls reserved for subscribers), speculated about then.

Technically. . . there is no resistance about the market as far as S&P's, because these are now, right now, historic highs. And though nobody seems to have noticed, the Nasdaq 100 (NDX) did make, by a slight fraction, an all-time high close TODAY also. (Mostly our big core holdings as a matter of fact; and there's more to come as managers load up on them going into end-of-Q3.) If you want measurements of how high we can go; we already indicated that; today's high clearly in the 1525 for the June S&P is about right as forecast daily (we don't want to be greedy after all, but [higher levels discussed], so we can wait until next week for that if necessary). Barring Fed intervention, look for that to have a better than even probability of occurring between now and a week from Friday. (As our intermediate/long-term goals are reserved, we shared the strategy in fact expected to potentially impact the market later next week, with end-of-quarter scrambling.)

Meanwhile, our daily goals have been reached nominally, with today's sparkling extension of the S&P futures, now also at new all-time highs, joining the cash. After staring over the edge into the abyss just three or four weeks ago, I hope most investors appreciate not only how much this has reversed in a short period of time, but how somber the market was amidst emotional despair all during that time we generally stuck by our guns with respect to believing the resolution would be to the upside, not to the downside. This is important to keep in mind as we go forward, because a lot of players only now are interested in buying stocks, which likely means you can complete at least the daily-basis phase anytime, amidst a 180 degree shift of the psychological sentiment. (In this respect, we shared part of the technical comments; the rest are reserved as per custom.)

Daily action . . . on the hotline has simply maintained an overall staunch bullish stance, close to uninterrupted, since late February, with an occasional intervening intraday effort in the opposing direction, when things got dicey or when the market was (as it did a couple times) failing at the 40-day Moving Average, which compelled attention to that from time-to-time, without enthusiasm of course, since we couldn't see the structure allowing a market that had crashed slowly over two years to crash again. Although so long as they couldn't get a weak weekly close, we stuck by our view that this would be resolved with a breakout to the upside, not the downside, in the process ultimately providing the germination of our rally for the Springtime, which is nicely underway, and actually (for the lead Average and key Average, the cash S&P and NDX) couldn't be higher or a lot better. Could some favored optical and new media stocks take-off now to challenge their high levels of a few weeks ago, as (per forecast last week) the focus comes off the Dow and S&P and goes back into what the guys & gals want in their fund portfolios (maybe why there's little analyst coverage of most we suspect) for the new era? We suspect that, so look for broadening (into these) even while the Dow and S&P potentially rest just a bit while this shifting occurs in the days immediately ahead. Now let's jump back to S&P action ideas, where this very bullish S&P stance dates from the 1360's for hotline (900.933.GENE) callers, before anyone says we're panting.

In summary of the week thus far; the Federal Reserve did exactly what was mostly expected, and the market responded (both in anticipation and after realization) in upward action. We would have been perfectly content to have the market horse around a little further, but the action early Tuesday suggested to us (more a feeling than technical analysis by the way) that this time stock markets just weren't going to wait, and then after knee-jerk reactions, would likely head higher.

The higher we go here, the more it will befall us to become less enthused (other than for several NASDAQ possibilities by the way), though clearly it was within the realm of probability that our Spring rally commenced with forecast "exhaustion" in the last day of February, went through a couple crucial tests later (not unusual after any major selling climax and automatic reversal"); as it got set to resume our calls for all-time highs in cash S&P first, with futures & NDX following.

I can tell you one of the things that really hoodwinked many analysts who missed this rally badly. They got sucked-into believing there's such a thing as "the market", and thought there would be a general tech wreck that would also weight heavily on the Dow Industrial Average, but that's not all they did wrong. They over-emphasized the large (and predictable) decline within many of the past year's hot IPO's coming-out of "lockup restriction", which of course enabled insiders to sell a large amount of their stock. Now don't misunderstand; that interpretation would have been correct for the effected stocks in the last few weeks, but not the general Senior Averages. There is the variation, as we were warning of the parabolic stocks correcting, while the DJIA bottomed.

At this point, we are now approaching a rising-tops pattern in June S&P's (ah), and that is going to likely be deflected on the first effort to penetrate that theoretical resistance (all action in areas never traversed are theoretical); but not the second effort on a daily basis. All declines should be contained for now, within our uptrend. If we get a war in the Taiwan Straits, or conflagration on the Asian Subcontinent (both discussed in detail last night and in the past weekend's Letter), all of this changes, but not how most think that it might impact the markets (as discussed at length).

In a nutshell . . our late February outlook for March nailed it once again; and we've mostly been long every dip in the S&P, and even used recent weakness in other markets to nibble at a few "value" plays outside of the big-caps. (Short-term remark reserved.) And the February call was based upon the most-bullish pattern we could contemplate; an end to the Fed worries impacting the market in an Election year; a forecast complex January/February 3-leg 5-wave decline finish (technical terms most technicians chose to ignore this year; probably because they like to buy into strength or sell in panicky weakness; don't know); looks like our call worked pretty well J.

Bits & Bytes . . . in today's issue discusses Micron (MU), Rambus (RMBS), Intel (INTC), long-held Instruments (TXN), action in Lucent (LU), MRV Communications (MRVC), a rebounding Liberty Digital (LDIG), Wave Systems (WAVX) and LightPath Technologies (LPTHA), plus a few thoughts about. ACTV (IATV), Analog Devices (ADI), Digital Lightwave (DIGL), and little Brilliant Digital (BDE) as well as Time Warner's (TWX) and America Online (AOL). Just these mentions of a number of stocks does not reflect whether our attitude is bullish, bearish or neutral.

In summary . . . we suspected an a pause in the morning and afternoon rally, and got it, caring about the NDX and the June S&P, not particularly the DJIA, which did it's job for the market as per necessity in recent weeks. McClellan Oscillator reversed last week, got fairly overbought on a daily basis, and is so today, with a +126 approximate reading. We continue long the S&P right at the moment, with big paper gains, and didn't suggest an exit of guidelines at any time today. It's little changed now, at 7:15 p.m. is exactly unchanged at 1517.50 in Chicago Globex action.

Overall (parts are reserved), what we actually suspect is our continuing intermediate bullish interpretation, with occasional short-term sell-phases necessary after a big move, but hoping we've achieved sufficient clearance over key resistance; hence only fiddling with selling efforts expected before markets edge higher (and then the end-of-the-quarter potential scramble). We are simply continuingly bullish for weeks, with no particular caveats absent any surprising news.

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