Wall Street Next Week April 16, 2001

WALL STREET, NEXT WEEK

Financial Astrology for successful investors and traders"

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WALL STREET, NEXT WEEK: APRIL 16, 2001
FINANCIAL ASTROLOGY FOR THE SUCCESSFUL INVESTOR AND TRADER

1. MARKETS
2. UP STARS/DOWN STARS
3. ASTRONUT
4. QUOTES
5. ON THE WEB
6. LETTERS

APRIL 12, 16, 20
Short term, a market top is approaching. It could have been last Thursday or this Monday, but my bet is April 20. We then go and retest earlier support levels. The questions are how low will the market go in May and whether investors should reduce stock holdings. We could drop to 2001 lows. If that happens, it will be not be because of recession (officially August), but more because price/earning ratios will drop and investors will no longer be willing to pay 22 P/E for the S & P 500 and 33 P/E for TMT growth. If it doesn’t, it is because investors will buy and hold for the long term stocks that are undervalued or are perceived to be worth more than cash.

Does liquidation of stock positions make sense? Fund industry critic John Bogle expects average market returns of only 5% over the next decade. If you don’t’ believe you will not get 5% over the next six to nine months, it does. Is that a realistic evaluation? Despite many gloomy factors, e.g. the California crisis, going fully into cash makes little sense. However, it may pay to consider selling some stocks here at lows and trade into equivalent sector buys in taxable accounts, e.g., selling Dell and buying IBM or selling Motorola (MOT) and buying Nokia (NOK).
We recommend raising cash levels and reducing margin over the next two weeks.
We will discuss this more next issue.

One small positive factor is that most wealthy Bush administration officials will have finished selling their multimillion-dollar investment to comply with government ethics rules. This could be a bullish indicator short term. J Now, if IBM comes out with good news this week as well, the combination could lead to a “higher permanent plateau” above DJIA 10,000 and NASDAQ 2000.

Now for the bad news. Should Alan wait until the next FOMC meeting May 15 to lower interest rates, the die will be cast for a recession starting this August (2 quarters negative GDP growth) Should he move this week pre-emptively, there is still some chance to avoid it. To date, we have bought value, not but cheaply, for the long term, i.e. May 2002.

ADVICE: We assume markets will be slightly higher to target Nasdaq 2050 and DJIA 10384 and that the IBM news will be good. No matter, with a rally to our numbers, and/or a time limit of this Thursday/Friday, consider reducing portfolios weightings from 100% to 80-95% and increase international weightings (selling $US) by end of May.

HOPE FOR THE BEST; PREPARE FOR THE WORST: CURRENT RECESSION ODDS 40%

KEYDATES: APRIL 20
DJIA: -> 10,384
NASDAQ: 2000 FLOOR/CEILING TEST
US$: Continue Distribution

2. Dell downgrade at 28-30 to under perform. Not an astrological judgment, but investors can find better values elsewhere, e.g. AMD, Compaq or IBM. There was also too much insider selling in March for my taste. Under 20, we would mark it up to market perform and at “value” $16.50 outperform. Wall Street, Subscribers, please see UP STARS/DOWN STARS for more.

3. A former Soviet wrestling champion, collective farm chief and mushroom mogul will open Stalin World theme park in Lithuania showcasing more than 60 statues of Lenin, Stalin and other communist icons. To recreate the horror of the Soviet gulag, Viliumas Malinauskas has circled the park with barbed wire, guard towers and speakers blaring patriotic Soviet songs and has laid foundations for prison camp barracks in "the style of the times". I have two reactions: First: We see no need to further downgrade Disney (DIS) because of this. Like most Media stocks, Disney is rated underform to sell and won’t become a long term buy for us until under 20. Second, Lithuanian markets are not yet ready for risk adverse investors - Wait. Stalin World opens to visitors [http://www.telegraph.co.uk/et?ac=001851641145319&rtmo=VDsqs8SK&atmo=rrrrrrrq&pg=/et/01/4/1/wstal01.html ]

From an initial population of just six American bull frogs introduced 20 years ago, there are now tens of thousands of what the French have dubbed "Florida frogs." The frogs, measuring up to two feet long and weighing as much as four-and-a-half pounds, dwarf the local and — apparently — tastier competition. Like Disney, these bullfrogs are not deemed fit for exclusive French dinner tables. Those who have tried it brand their legs "disgusting." Hence, despite the CAC40 drop from nearly 6000 to above 5000, we would rather not buy France to retaliate for these Gallic insults!
France Overrun By Giant Frogs [http://www.abcnews.go.com/sections/world/DailyNews/france010403_bullfrogs.html]

4. "The bad news could actually be fully discounted in the stocks themselves."
Ned Riley, chief market strategist, State Street Global Advisors
HW: That is indeed the $64,000 question.

“If you look backward, it looks pretty bad. But if you look ahead, things look significantly better.”
Richard Salsman, president, InterMarket Forecasting
HW: Yes and No, depending on what time frames you use!

5. “Some of the most interesting (and amusing) things happening in the world today are happening in financial markets. Someone has to chronicle these doings in verse. And I guess that someone is me.” http://www.wallstreetpoet.com

6. READER: "APRIL 12, APRIL 16, APRIL 20TH? The key question after this next rally would be: is it an opportunity to short or continue to buy and hold?"
HW: If you are a trader, this is a low risk short into May. If you are an investor, place stops and prepare to increase liquidity.

READER: Do you think there's much of a chance we've seen the NASDAQ bottom? In your newsletters, you have been indicating an interim rally followed by perhaps, a lower low in May. Do you still believe that?
HW: We are having the rally, so there is risk coming up. I wont be sure of how much until the week after next.

READER: I'm looking for collapse into Apr 19 with low Apr 25-27.
HW: That is certainly possible, although our original work of October last year suggested May as the bottom, but we could have already seen it.

READER: I didn't see an indication in WSNW as to why IHI should be going up soon.
HW: I would ONLY repeat myself that IHITF WILL go up sooner, or later.
· Factory will be in FULL production this July. Currently successful in all pre-production tests.
· They will shortly begin to accept orders and this will be extremely large.
· IHI stock is in relatively strong hands and few large holders are likely to sell before the late Fall, if then.

READER: Just like the way up they went to extremes.. a lot of the technicals we use in normal mkts don't work at extremes.. i.e. put /call, arms index... where the vix and vxn go.. in extremes they go off the chart.. last week those looking for further correction stood at only 17%.. and the big up move Thurs.. shows you that people are more concerned about missing a up move than potential down move... IBM comes out with earnings after close on 18th.
HW: Well then, if IBM is doing what I believe there are doing, we only have to sweat out a few more days.
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