The Inger Letter Forecast

March 25, 1999

Midweek snapback behavior . . . was part of the advance pattern call. And while commencing aerial combat over Yugoslavia (not just Kosovo) complicated the blue-chip backdrop, our market forecast in fact was not dependent on any of this. The only aspect that was, had to do with fairly short-term hotlinecomments regarding a quick drop (should bombing commence during market hours, and it did) being met by mark-'em up operations on the market by specialists and the like, before they take 'em down again. This is quite common, as boys on the Floor absorb stock onto their books in a purge, then gradually feed it out on ensuing rallies, at least temporarily. Thus the Nasdaq behavior was a good bit more exciting Wednesday, than was the upside in theDJIA, or the S&P futures, where we called anyway for a rebound move Wed. to around the 1280 level.

So, outside of the queasiness that always occurs when international "normalcy " is jolted, there's little about Wednesday's session varying from anticipations. Other than scalpers able to respond therefore to the moments surround the first wave of "Operation Allied Force", we maintain our very successful short-sale from the June S&P 1330 vicinity, initiated early last Friday, concurrent with a Dow Jones Industrial Average brief surge above the 10,000 level. Now, because some of the technology stocks are showing divergent action, let's look at the very curious implications. (Again; that trade has been profitably exited long before this posting, a brief period on the long side of the ledger, an indeterminate late morning and early afternoon, with a planned speculative short that may or may not be reversed long again on our 900.933.GENE hotline Thursday or Fri.)

A rally to pray for (entire section reserved)

It strikes us as not particularly bullish to "extend" upside targets, in a way that basically to me sounds like holding out hope for a rebound that gets back merely to where things were towards the end of last week. That's not an advance to buy for; that's a rally to pray for, in order to sell, for all who missed the opportunity in a wild Triple Witching week. Now, if I'm missing something; (analysts are) more than welcome to illuminate me (not with a Laser targeting device please); but otherwise we can't see how that should encourage American investors now (for other than short term moves, inline with our end-of-Quarter thinking). That's just one implication of what's curious about this strange day, in which a strange NATO engagement has begun, and in an area of the world that normally considers itself sophisticated, to an extent sufficient to be above the old petty grievances of antiquity, which it obviously isn't.

Bits & Bytes. . . will thus be early in this segment, as it all ties in together. Strength in most of the leading technology stocks, as represented by the Nasdaq 100 (NDX) dwarfed anything seen in the general market today. Nevertheless neither the NDX or the Nasdaq Composite itself moved beyond the normal snapback percentages typically seen after a general market thrashing. In fact if anything, there was more strength in the NDX than Nasdaq overall. (balance reserved)

If these rallies are contained and controlled, then the market could run into trouble again as soon as midday tomorrow, though that's not a given right here. Remember; hope springs eternal, and we have the end of the 1st Quarter approaching next week. So, you're going to see alternating or even desperate efforts to restore the waning optimism, as the Street tries to make managers at least somewhat comfortable with ideas of buying, not selling, at Quarter's end. That's precisely in fact what's on every professional's mind beyond these day-to-day actions, as they ponder what happens if at least a modest resistance to new buying occurs at Quarter's end. That wouldn't go unnoticed and could thus herald a new round of selling sooner rather than later. (Stay tuned.)

This is where tech comes in, because many stocks have already "broken stride" so to speak. At the risk of being cautious, there are several things we know:a) that even in a gut-tearing bearish breakaway to the downside, you're going to have requisite efforts to rebound the market, b) that a one-third to one-half rebound is typical for negatively acting bigger picture stocks, while c) the leaders will tend to retrace one-half to two-thirds of the initial hits before starting new downside, if indeed the pattern is a bigger picture bearish one. Is this a different view here? Not at all; in fact we cautioned against shorting or buying Puts into the hole anytime past last Friday morning; just exactly why we like doing so on the market's surges, and then evaluating things on the ensuing purges. Here things are a bit shakier than usual; that's were the International and Oil situation comes in. That petroleum stocks in fact did not exhibit strength today, can be interpreted bullishly by the market's optimists here, but we will actually oppose that. Why? Because the petroleum strength based on everything other than a "war scare" is a kind of strength that is more likely (as previously postured) related to superior supply/demand imbalances, which would argue what we have: consolidation before still higher oil prices.

If you throw in earnings concerns, or the inability of the market to respond to decent numbers, it is an argument that higher energy and commodity prices, gently and gradually combine to result in higher interest rates, as worldwide demand improves. The strength in the Dow Utilities Wed., along with reasonable stability in T-Bonds, has more to do with flight-to-safety both from Europe, and from domestic sector shifts from equities to debt instruments, than it does with low-interest rate hopes. See what I mean? These are all factors that you can interpret as impacted by today's commencement of hostilities, but probably they're related to domestic considerations more so. If so, that says that the American markets are basically still complacent as regards fear of a wider war developing in the European sub-continent, and surrounding areas.

Emotionally, it's easy for us to be torn here, as we'd like the rally to move further to higher levels so as (per original expectations to an extent) to allow the largest number of new candidates to enter zones, while at the same time we're not particularly optimistic about the market as a whole. If one is to compromise thinking here; it would surround the idea of an irresolute market for a few days that manages to come up into the Quarter's end, whether from (ideally) a lower level or not, then is hit harder going into the middle of April. We should note that if the market's really bearish, it shouldn't give traders a move all the way back to the highs; but should make it difficult to exit, and that's something we must keep an eye on (in other words a true breakdown would have a dutiful rebound, but not a heck of a lot more).

Technical section (support & resistance guidance), Economic News & Releases: (reserved)

In summary. . the McClellan Oscillator was at -55 up from -76. Tonight's Globex premium for the June S&P is 1361, which has the futures up about a point and a half from Chicago's close.

(portion reserved) Ideally, given the recent drubbing and the near-automatic defeat for those who sell or short afterwards of the fact of any decline, this looks like a downward consolidation, which means a rally within a newly developing downtrend, but one that was so ferocious initially, that a rebound is basically a given. We'll delve into this more on Thursday night's report. (As of this DB excerpt post, our 900.933.GENE hotline is actually long, but we have no idea yet for how long.)

The volume of all the gold ever mined can occupy a cube 63 feet on each side.