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Stock Jockeys Derby

June 30, 2000

A "selling wave" . . . in the wake of a rate-change "pass", was the expectation here late night as you know, although the way it began left one wondering for awhile if it really was going to occur. I suspect the realization that earnings are now "butting heads" with rate relief, is fundamentally the most evident explanation for the mediocre performance in the financials, large consumer stocks, and the NYSE itself, while the NASDAQ market retained far more of this session's earlier gains. As a matter of fact, though defensive in sympathy with the NYSE late in the day, the NASDAQ was itself up 81 for the session, while the key Nasdaq 100 (NDX) actually gained 72, finishing off the highs of course, but above (slightly) the daily-basis most recent rising-bottoms pattern.

While one can view the modest weakness in T-Bonds, and push of the 30-year rate back toward 6% again as disconcerting, we think the action was also in the "buy the rumor sell the news" style of trading action, not signaling that rates heading higher in the overall heart of the matter. As a matter of fact the Dow Utilities (ditto Philadelphia Ut's too) were strong up today, moving near a key resistance area related to recent downside. If they get through that, it's a plus for the outlook on the interest rate front, which would also be helped (lots) if Oil were to ease just a bit.

Also, and little noticed we suspect, the Dollar Index (reserved). To us the most important aspect of events has been what has not happened in recent days; that is penetration of any key support points for the all-importantSeptember S&P contract. While we certainly do not have an oversold daily condition in some aspects, we have been able to work down the overbought condition that prevailed early this month, in harmony with our call. That as you know, was for the market to rally from the May 23rd / 24th long-expected "grand dames" (and tests for many making their lows in April) bottoming correction; the big rally into early June, and then an "irregular corrective month", which hopefully would not move to dangerously low levels. It did not, although certainly those gaps remaining are a bit of a concern, though the further we get from them, the less significant they remain from a technical analysis standpoint.

While we would never dispute the chances of parts of the Summer being rocky and a bit tough at various times, and maybe the Fall too, we would not embrace the views of those who adopt that sort of thinking simply because of modern history's repeated Summer breakdowns (most all of which we forecast and caught, but view this year as different, which it certainly has been all year) or because they missed our April / May forecast bottoms, and are praying for bargains to return in the major stocks. For example, we suspect that after we enter July (reserved forward outlook). And therein we don't disagree with the earnings concerns for certain retail and consumer-type stocks; but on the other hand these are sectors we've warned about here for over a year now as relates to retailing and e-tailing, and over two years as relates to the majority of multinationals (a slew of which sill have at least one disappointing Quarter to report, which was our forecast in this first half of 2000; not our problem that earnings estimators had absurd outlooks for such stocks).

What we do dispute is the idea that we have to have another major "purge" in the market; that's not just the idea of the Fed respecting the political season later this year, but the realization that we had our parabolic blow-off earlier this year; and the ensuing rotational breakdown first in the incredibly-crazed "dot.coms" and then normal stocks, and lastly the "grand dame" tech stocks, all as outlined, and to which the market adhered almost surprisingly close-to-the-mark as to timing of it all. One of the reasons we suspect the market will not accommodate those wanting bargains (as they call them) in the Fall, is that the market was purged while the majority of such crowds in fact were still bullish; hence unless you break the strongest techs it's very hard to tank a market that has already been tanked in the run-of-the-mine sectors, which is why our optimism indeed was looking for forecast lows in the Spring, not getting excited about rearview mirror earnings. On top of that, our outlook for key (components in many cases) techs is favorable (reserved).

Technically . . . there's little resolved (regarding the parameters we've outlined in these several days as the battle continues), while psychologically the selling in the wake of a non-hike was the most sensible expectation, given the embrace of our view about the "Fed being done" by many other analysts of late. We agreed with the consensus; before it was a consensus. In our view the most bullish immediate action, nevertheless, would have been a minor hike, as discussed in the last week or so, but not felt to be what they'd probably do. Why would that have been so bullish? Because it would have removed any doubts about August's FOMC meeting, though we suspect that because the anecdotal information already is showing at least some forecast contractions in demand; chances of any big hike then would be nearly totally unrealistic anyway. However, now we have to listen to economists and strategists debating this throughout the Summer('s rally?).

Hook; the best stocks ideally won't accommodate the fear mongers by coming down very much, regardless of what the beleaguered consumer and financials do (though even they are no longer expensive) during this timeframe. And while one can point to the 750 area of the Banks (BKX) as daily support clearly "at risk", what if you took that out, but (bank analysis comment reserved). At that point (or somewhere in between), you'd be looking at an oversold daily-and-weekly basis, which might turn into nothing worse than a secondary test of the year's earlier financials bottom. This would all be pretty nifty actually, as we warned that all the analyst (vested?) optimism earlier this month was excessive, in the false upside breakout that extended an old move to overbought, while the current concern could work a bit lower, but become a false downside move, technically having at least the potential to complete itself later this Summer coinciding with friendlier rates in the economy (and eventually anticipating the Fed) along with greater confidence in soft landings.

Now let's look at the Spoooozzz…. as the September S&P is still in neutral (and batting around these inflection areas) on an intermediate basis, while daily is bumping along oversold (by virtue of not cracking in the last week), and the hourly is likely going to be oversold at this rate within a couple hours or so Thursday morning. Key ranges short-term are (reserved for subscribers only).

Stock Jockey's Derby

If we broke the mid 1450's, we're sure a lot of people would sell it into the hole, and we suspect they'd get caught too…though if the first effort to comeback after an early selling squall Thursday doesn't come back above roughly 1475 (or as determined on the 900.933.GENE hotline)), we'd be tempted to play for a selling effort anew, though for now we're still suspecting some renewed Quarter-end buying to come in after morning weakness; as it did most of Wednesday, then was obscured by the selling in "old economy" consumer-type issues, that generally are of little or no interest to us, outside of the "tone" they impact to the market as it appears worse to those who don't watch the NDX (for instance) separately from the DJIA or even from the all-important S&P.

At this time jockeying in the market continues, with most stocks (we like) higher or consolidating. We know (given the perspective of holding the supports and still challenging rangebound highs) that this is somewhat akin to being neck-and-neck coming around the far-turn at Delmar (well, it might be Aqueduct), bouncing above the saddle, but still capable of being thrown-off before the finish-line. In this race, the old nags (old economy stocks) have already faded, and might be in the warm-up stages for their next race, but hardly anybody's focused on that meet as of yet. At the same time, the new economy thoroughbreds (real stocks; pure dot.coms don't count for over a year in our view for the category) are short-term a bit winded, but still-engaged in the race, and going for gold. They will not make it instantly, but reaching that finish-line isn't impossible (this is analytical, and reserved) over a reasonable period of time, because the Senior Averages are not too laid back yet; at least not as of this writing. And that's a plus from this past week's irresolute action which has been frustrating to bull and bear alike, but is in harmony with our call for June.

Our view in recent weeks has been that the Fed's were generally "done", but that if they in fact passed hiking (which was the correct decision, just not the most immediately bullish market one), it would invite "good news" selling into the initial buying, but that such selling would be contained & controlled Thursday morning, with the market coming right back up ideally even before Friday's Quarter's end. It was definitely tough to capture or forecast minute-to-minute; but that's our view.

We caught most of this on the (900.933.GENE) hotline; (more for players who did not wait for the Wed. mental stop disciplines that were fairly wide (more than we should have probably) to allow for post-announcement oscillations that we didn't want to get caught-up in too much; thus did not short the decline, as our bias for the ultimate resolution remains as stated, and that's unchanged from last night's discussion and as reviewed above. Thursday could be flat-out: down then up.

In summary . . . the market had mediocre breadth yet again and wasn't helped by nervousness when the FOMC meeting passed on another hike, but worries about the strong durables (up 6%) and now August; that's why it would have been more bullish for the near-term had they hiked. At the end, they did what we thought (even before the consensus), and so did the market oscillating with "the flow"; gently lower, after a sharper break in the Senior Averages, where at one point the DJIA was up over 100, but finished ahead only 23. (Thursday's call, a.m. selling; then buying.)

The McClellan Oscillator reading is currently is around +8, with summation dots improving (they will do that whenever the Oscillator moves slightly over the zero-line), which is a modest buy for those who watch it that intently, though in our view it's been turning up for several days already, after easing down from overbought, irregularly, for much of the month as generally expected.

Yes, S&P futures gaps of course are still there, overhead supply acts as some restraint impeding breadth from expanding, probably even with the forecast friendlier Fed or even final late Quarter buying adjustments (mildly in an ideal scenario). As of 8:00 p.m., premium is 1698 on Globex, as Sept. SPU's are around 1471.80, actually up slightly (60) from Chicago's little-changed close.

A gold nugget can be worth three to four times the value of the gold it contains because they are so rare.
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