Market Action

From a sector standpoint, perhaps the most notable development of the past thirty days was the strong action of many smaller technology stocks. This strong relative performance has also carried over into the first few days of May.

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April was a consolidation month and we think there could be weakness in the last half of May, carrying T-bonds to the 8%-8.25% level. However, we look for 7% before 1986 is over and possibly even 6%.

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Among the sectors we regularly monitor, the big winners in March were Medical Technology, Shelter and Ethical Drugs. High Tech sector issues and the Oil Patch sector were down on the month while the popular averages scored 5%-7% gains.

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A few “experts” who haven’t learned about percentages yet called the February surge “unprecedented,” the largest monthly move in history. Well it was hardly that, but it was a very strong market.

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The current advance was an unusually slow starter, but November really cooked. The DJIA was up 7%, the S&P 500 up 6.5% with the Value Line up about the same, evidence that the market is broadening out.

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February was a healthy consolidation. Higher prices are expected shorter-term and longer-term. The Major Trend Index continues to register powerful readings. The Early Warning Index of intermediate peaks remains positive, but the margin is narrower than a month ago.

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The DJIA and S&P were unchanged for the month while the unweighted indices declined one or two percent. For two months in a row now, equities have lagged far behind bonds. There were however some groups and sectors that performed pretty well in October.

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From a portfolio performance standpoint, the stock market fizzled out in September. The market averages posted small losses for the month and those who were anticipating another surge on the bright side were sadly disappointed.

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June was down in the middle and up at the end. The net was a 2.5% gain for the DJIA and 1.8% for the S&P 500. Not much, but a decided improvement over May. Actually, in the midst of the June churning, some significant undercurrents were occurring.

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The Major Trend Index shifted to Negative status as noted in the special May 22 Interim Memo. However, downside vulnerability appears quite limited. At any rate, expect a good market in the last half of 1984. It is too late in the decline for most to build cash, although some futures hedging may be appropriate for those who can.

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The Major Trend Index remains in “neutral,” but it appears the correction lows may have been seen around 1120, DJIA. Our “Early Warning” work remains constructive.

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The Major Trend Index remains in “neutral,” but it appears the correction lows may have been seen around 1120, DJIA. Our “Early Warning” work remains constructive.

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T-Bonds broke the August 1983 lows, but municipals and corporates seem to be holding. Pessimism is rampant. Investors should consider buying T-Bonds now. The biggest risk may now be not owning bonds. Positive action on the deficit could kick off a large rally.

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Our Major Trend Index is down to Neutral temporarily, but we think the market is now in final washout phase of the long complex correction dating back to late June 1983. Our guess at this time is the late February lows will hold.

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Our Major Trend Index says it’s still a cyclical bull market. The market is now in final washout phase of the long complex correction dating back to late June 1983. Expect to see lows momentarily, followed by powerful upswing carrying to new market highs by summer.

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The cyclical bull market, exploding over a year ago looks healthy, but we are not sure the 1983 corrective phase is over. Our intermediate term timing work does not want to turn positive. On a secular basis, the stock market is probably about two-thirds of the way through the move beginning in 1974.

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The cyclical bull market, exploding over a year ago, looks healthy. The 4-5 month corrective phase may be over. The excesses have been worked off and the next up-leg is due momentarily. On a secular basis, the stock market is probably about two-thirds of the way through the move beginning in 1974.

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The bond market has backed off this last month and there is a remote chance it might even retest the lows. But it looks to me like the lows have already been made and the cyclical bond bull market is back on the track.

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Short-term, an October decline may be in order, but nothing serious. Most excesses have been worked off in the third quarter. The cyclical bull market, exploding over a year ago, is looking much healthier.

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The bond market is in the midst of both secular and cyclical bull moves. The cyclical bull market target zone is 9% yields for T-Bonds in the next 12-18 months. Maybe much lower on a secular basis. The recent correction carried to our 12% T-Bond buying zone and we loaded up again.

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