advertisement
Editor's Note: Every couple of months, the author of Supermodels answers readers who write in to ask questions with the cry, "Hey Modelman!"
Hey Modelman: What are you smoking? I am surprised you are telling people to expect new highs in the Dow Jones industrials ($INDU) (in "19 stocks for a new Dow High.") Isn't it more likely that the Dow will bump up against its old high and be repelled as it was throughout the 1970s? -- M.C.
Jon Markman: You may be right. That column was probably not my finest moment. It published on the exact day the Dow began to tank. I think financial journalists in good standing are allowed a mulligan now and then, don't you?
To make up for it, I checked in with my favorite timers this week: Veteran tape reader Stan Weinstein of Global Trend Alert, Paul Desmond of Lowry's Reports, Bob Drach of Drach Market Report and Tom McClellan of McClellan Market Report.
Here's the two-minute version of their views:
- Weinstein expects a minor rebound from this week's lows, but says the highs of the cycle have been made and a "baby bear market" is commencing. He thinks the Nasdaq ($COMPX) may rise 50 to 100 points in the next week or two, but then sink as low as 1,900 to 2,000 by the fall. After that, he expects a solid rebound into 2007. Stocks he would aggressively sell on the coming rally include CA Inc. (CA, news, msgs), Fording (FDG, news, msgs), Kinder Morgan (KMI, news, msgs), EOG Resources (EOG, news, msgs), Carnival (CCL, news, msgs), Cerner (CERN, news, msgs) and WellPoint (WLP, news, msgs). One of his favorite short-sells is Allergan (AGN, news, msgs) at $100.
- Desmond has been saying for some time that the current bull market is very, very long in the tooth. He is looking for a recommencement of the "secular," or long term, bear market that began in 2000 and was interrupted by a "cyclical," or intermediate term, bull phase that started in 2002.
- Drach is heavily negative on the broad market and has been for almost all year. He sees a great disparity between high-quality and low-quality stocks and does not expect to give an all-clear signal for several weeks, if not months. Drach has an especially great record of calling bottoms, so when he gives the whistle I will let you know.
- McClellan, who I think is the best intermediate-term stock-market timer going these days, is actually a lot less bearish than the rest. He called for the mid-May weakness a few weeks ago as the market was making highs, and now believes the selling will end the week of May 18-23. His cycle work suggests the market will then advance to new highs by the end of June, and then "chop sideways" through the summer into a soft spot, but not a crash, in the fall. His most interesting forecast is for crude oil, and energy stocks, to bottom in June and then advance through the end of the year, culminating in $100-a-barrel oil and $4-per-gallon gasoline.
I will keep track of all these forecasts over the next four months and report back if any of them change.
Hey Modelman: You haven't written about Mr. P in a long time. I would be very interested to hear his views on market direction if you get a chance to get hold of him. I always found your articles about his comments helpful. -- D.E., Wisconsin.
Markman: The mysterious Mr. P -- an expert on market cycles -- was bullish for a year through the end of April, but has since turned seriously bearish. For those of you just tuning in for the first time, he is the veteran research director of a major global macro hedge fund on the East Coast who shares his views with me from time to time.
Mr. P has seen and done everything in the markets, from risk-management to sales management; from bonds and equities to currencies and swaps; from New Jersey to Switzerland and Taiwan. On behalf of his partners, he rarely rests -- sleeping just a few hours a day in the early morning -- as he scans the horizon of time and geography for events in far-off places that might help or harm their positions. In a normal 14-hour period, he will confer with his firm's and rival's traders in Tokyo and London; read, analyze and distribute news headlines to peers; consult with professors, journalists, miners, mathematicians and farmers; and book travel to Iowa or Brazil, if necessary, to check on the soybean crop first-hand.
Mr. P, to whom I grant anonymity, is often very right -- and even when he's wrong, he can make you money. When first introduced in my column in early 2001, he called the Federal Reserve's hikes and bear-market action turn by turn. In the autumn of 2004, he called for a bear market and recession in 2005, which was wrong, but he advised buying metals and energy, which was right on: A set of 10 metal and chemical stocks he endorsed then is up 53% since, vs. 9% for the market, led by a 190% advance in Commercial Metals (CMC, news, msgs) and a 105% move in Phelps Dodge (PD, news, msgs).
Why is he negative on the market now? Couple of things. An arch-conservative, Mr. P has become highly concerned about the loss of confidence in President Bush both domestically and overseas. He faults Bush for not working hard enough at his job and hiring badly.
Rate this Article
High
