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Wall Street, Next Week December 22, 1997




With holiday trading this coming week ahead of Venus SD on the 26th, Mercury SD on the 27th and a new Moon on the 29th, I plan to do what the big boys do, party more than trade!

Our game plan continues to be to buy:

A)January effect stocks that I will unload without hesitation, should the market go south before I expect it to. For market clues other than sky omens, look to the 30th as a "directional" day, as well as the classic first 6 trading days of the new year.

B) Fallen angels like OXHP and still more in the precious metals sector.

We are also researching more of the Asian Flu fallout, and compiling a list of potential corporate winners such as AXA and Samsung and losers such as Hewlett Packard .

The fact we are buying with one hand, does not mean we are not selling with the other. US consumers' debt burden is at an all-time high, with debt service totaling 17.5% of disposable income. The percentage hasn't been that high since 1989, right before the country entered a recession. Note also the warning given by Merrill Lynch this week which follows.

KEY DATES: 12/26, 12/29 12/30.

2. NEW YORK -(Dow Jones 12/16)- The chief market analyst at Merrill Lynch & Co. says investors should brace for a possible severe correction in the U.S. stock market next year. Merrill Lynch analyst Richard McCabe said the market could be vulnerable to a cyclical decline in 1998, which could bring the major averages down as much as 25%. A correction of that magnitude would pull the Dow Jones Industrial Average, now around 8,000, down to around 6,000.

The correction, however, will lay the groundwork for the next cyclical bull market, which should start in late 1998 or early 1999. McCabe spoke at a press conference at which Merrill Lynch analysts provided their 1998 economic and investment forecasts. McCabe said that before the onset of the correction, U.S. equity markets will likely reach new highs either in the final weeks of this year or early next year, as stocks near the end of a four-year cyclical bull run.

McCabe referred to the turbulence in Asian markets and the October sell-off in domestic markets as a "warning crack" that the current bull market is nearing its end. "It's a wakeup call," he said. "Markets are like trees. They don't grow to the sky."

3. I review the long term charts of Hong Kong & Japan on a weekly basis (you can view this at Bartons Asian Stock Charts on the Internet). These charts reveal that further major lows are underway in Both Markets. Knowing this, can one not conclude now that the Dow has reached its top and The Asian Flu will follow suit now and bring it further down as well?

HW: How you look at Asia depends on whether you are looking from the short, intermediate or long term view. As to the US, if EVEN Merrill Lynch says we will have a bear market next year, WE WILL HAVE A BEAR MARKET NEXT YEAR!




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