Overheard On The Street
Here’s what they’re saying at mid-day:
Paul Desmond, President, Lowrey’s
Research: “Since early April, our Buying Power Index (Demand) has dropped
more than 40 points in a more or less steady decline. This would normally be a
very negative indication, except that the Selling Pressure Index (Supply) has
also been dropping at a somewhat faster pace. This unusual pattern of
diminishing Demand and diminishing Supply has had the effect of limiting the
upside potential of the market, while at the same time limiting the downside
potential, resulting in a near stalemate for most of the major indexes. As we’ve
pointed out in past reports, the vast majority of stalemates in the past have
eventually been resolved to the downside.”
Paul Rabbitt, President,
RabbittAnalytics.com: “We like the current market psychology. The bull
needs skeptics, and we are getting some evidence of fear. Three of four polls
are pessimistic, and fund cash levels rose last month. NYSE Specialists are less
short than the public, a significant change from the past few months. NYSE
specialists are the equivalent of savvy insiders, and they have not been this
short since November, 1999, another major market bottom.
“Stocks look okay to us, just okay. We are long, but we have tempered
expectations. The light is at the end of the tunnel with regard to the Fed
raising rates, and this is good. The correction of February-April has bottomed.
However, the economy will slow in the next nine months, and earnings will not
have the same buoyancy we have grown accustomed to. Moreover, investors jumped
right back into the old names on this recovery rally. These are the names
everybody already owns, so who is going to buy these next?”
Frank Gretz, Market Analyst, Shields
& Co.: “It’s a mixed market, and certainly it can change for the
better. The rally that got under way in late May generated some impressive
momentum numbers. For example, three out of four days with advance/decline
ratios better than 2-to-1. That kind of momentum isn’t dissipated quickly. At
its best level since February, the NYSE Advance/Decline Index is outperforming
the Dow and S&P. This is not how rallies typically end. In fact, rallies
typically end in just the opposite fashion, with the average stock or market
breadth acting much worse than the stock averages. The overall uptrend,
therefore, seems to have life.”