| Investment Views (March 8th1999) |
Did we breakout or have we reached the upper limit of the trading range?
Why this
question, when the Dow made a new high Friday, closing above 9700 for
the first time?
The problem is, this new high is not confirmed by the S&P500 index
and the Nasdaq nor
any other indices in New York. Is the Dow just a leading indicator
waiting for the
other indices to catch up or is it a topping process? We do not
know for sure. With
10000 on the Dow only about 250 points away, we have the feeling that
investors should
take whatever profits they have and not wait until the final high.
Whatever the develope-
ments, we feel that 10000 should build a meaningful psychological barrier.
After all the profit
picture is not all that rosy. But liquidity is still a positive,
especially if the Japanese are
finally starting to reflate their economy.
None of the continental European markets made a new high. Indeed
the Swiss Market
index is still down 15% from its all time high made in the summer of
last year. We doubt
very much that any of the continental European markets will make a
new high, because
these markets are not as well supported by the retail investors as
the US. Also last
year the banks and hedge funds went overboard. This year they're
still pulling in their
horns. Thus the most we see on the SMI will be below 8000.
But that is only possible,
if we overcome the massive resistence between 7240 and 7350.
Otherwise 7350 might
just be the high we see for this move. If the ECB should lower
the interest rates, the
story should be more bullish. If we break the 7000 again, then
the market will turn
quite bearish. We should test 6500 at the least.
Germany's market has been extremely weak. We also doubt that the
dax will make
new highs. The socialist and green government has disappointed
the financial
markets repeatedly. Unless the markets perceived that Schroeder
has finally taken control
from his left-leaning finance minister Oskar Lafontaine, the Dax will
remain sickly.
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We watch SAP and Raisio in despair. Raisio increased its profits
by over 30% last year
but its shares are lower than last year. SAP is treading watch
between 400 and 500.
Traders should probably get out of these shares. But for the
very long term, we're
still very positive on both companies.
The US treasury bonds have been quite volatile. Yields have risen
to 5.75 before
falling back on the employment data on Friday. There were more
jobs created
than the consensus expectation. But wages have been very tame.
We see the
situation as a confirmation for our long held view that the US unemployment
had
been consistently under reported. The labor market is not as
tight as the official
numbers suggest. Positive as the job creation figures were.
The consumers
in the US are piling on debts faster than their salaries increases.
We must hope
and pray that the ECB will lower the interest rates soon, so that the
US
will no longer be the only consumers sustaining the world trade.
| *The stock prices are provided for informational puruposes only and not intended for trading purposes. The opinions expressed in these pages are what they are: opinions! |
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