Generals Continue to Push Big Stocks
The momentum
stocks continue the parabolic rise, as some of the stocks we
mentioned yesterday, like Harmonic [HLIT>HLIT], Exodus [EXDS>EXDS],
Redback [RBAK>RBAK], all had strong multipoint moves after continuation
entries above the previous day’s high. When stocks have that kind of power, just
hitch a ride.
| size=4>“The…major investor psychology stocks that are in parabolic rises will continue to be marked up until year-end…” |
Yesterday the SPYs (Spiders) took out
Wednesday’s high of 144 1/16 by 1/8, then reversed that high in addition
reversing the 143 5/8 opening, trading down to 143. This proved to be the
intraday bottom and the morning trend. The SPYs went sideways until 1:00 p.m.
ET, then broke out of a Slim Jim pattern at 143 1/2 and traded up to the same
high of 144 3/16 and that’s where the afternoon trend stopped. Save your
five-minute charts. You’ve got to become very in-synch with these trends because
it helps your trading. The NDX (Nasdaq 100), of course, led the day, +33 points,
while the long bond is closing in on the 6.50%face=”arial, helvetica” size=2> yield level, finishing at 6.46%, for its seventh
lower low in succession. I would expect them to attempt a rally if they take out
the Oct. 25 low of 90-23. Or if not, and it makes a double bottom right here at
yesterday’s low of 90-25, look for a close above the high of the low day for the
rally to start. This is the March bond we’re talking about.
The media drones are all over, with the
Fed rate raise scenario in first quarter 2000. Headings read: “Mortgage interest
rates likely to top 8% soon”; “Economy roars ahead; interest rates may rise.”
Give me a break. These are the same writers that told you how benign inflation
is and to buy stocks last week — except the headlines were reversed. Negative
revisions are the norm with this Administration and the Bureau of Labor
Statistics. You slide in the bad news after all the attention on the expected
numbers dissipates, and then you avoid the market meltdowns. If you take a look
back, it’s been the same way now for a year and a half.
The S&P 500 is now up 16.8% year to
date, with the Dow +22%. The S&P 500 has been more difficult to move because
the rally is so narrow. But I fully expect the Generals to make a major effort
to follow the Dow and hit +20% by year-end. To do that, they will continue to
push their big stocks, like General Electric [GE>GE], Microsoft
[MSFT>MSFT], EMC [EMC>EMC], Sun Micro [SUNW>SUNW], Intel
[INTC>INTC], Wal-Mart [WMT>WMT], and Home Depot [HD>HD]. The drugs,
like Merck [MRK>MRK] and Bristol-Myers Squibb [BMY>BMY], which have been
down recently, will get a push also because they are major parts of the funds’
portfolios. Expect AOL [AOL>AOL], CMGI [CMGI>CMGI], and Yahoo!
[YHOO>YHOO] to continue their march. The other major investor psychology
stocks that are in parabolic rises will continue to be marked up until year-end,
after which bearish strategies will be prudent. Hedge funds get paid on a
year-end mark-to-mark basis. You can bet they don’t want to start the year 2000
off with those stocks at these mostly self-created levels. Some of them will be
tripping over each other to take profits in the New Year.
| href=”/.site/stocks/commentary/khview/01032000-3257.cfm”>Program Trading Numbers | ||
| size=2>Fair Value | size=2>Buy | size=2>Sell |
| size=2>18.40 | size=2>19.60 | size=2>17.70 |
Pattern Setups:
EMC [EMC>EMC], Sun Micro,
Microsoft, GE, Wal-Mart, and Home Depot. Investor pschology stocks that set up:
Foundry Networks [FDRY>FDRY], JDS Uniphase [JDSU>JDSU], QLogic
[QLGC>QLGC], Vignette [VIGN>VIGN], and Xilinx [XLNX>XLNX].
Looking at the tape right now, we’ve got
the S&P futures up 7 points. It looks like they want to play the game early
on on the upside.
Have a good trading day. And I hope
everybody’s getting ready to have a wonderful holiday.