Look at the market from a technical perspective
Interview: Morgan Keegan---Wilson, John---Equity Strategist
>> stocks ended the day higher pushing the dow to close above 10,000 for the first time since may of 2002. can the level hold here? john wilson is director of equity strategy joining us from his office at morgan keegan in memphis and will look at the market from a technical perspective. psychologically, dow 10,000 is an important level. what’s the reality of 10-k here at this market and what will it mean for the future?
>> it is a psychological level and psychology is much of the reason stocks go up and down in the short run so i think it is an important level but if you look back and take a trend line off the peaks, we took that out a couple of weeks ago. we also had a base failure at 10,000 back in may of 2002. so i think it’s key to get above that level. whether or not having finally penetrated and closed above it for the first time since may 27 of 2002 we’re going to hold it, flip a coin. we may close under tomorrow or waffle back and forth a little bit and quite often as you take out a key resistance level, it takes a few shots at it to take it out but i’m still bullish as i was last time we talked and we’re likely to move higher.
>> on the technical basis, is it truly a key resistance level or more of a psychological resistance?
>> i think it’s both. i don’t think it’s a key, key technical level but i like to see, when i look at individual% -stocks , if i see a stock approaching a level where there was a failure before of a base in which case there was on the dow at that 10,000 level, then i i think it’s key to take that out and put it behind you and we haven’t been looking at 10,000 from the north now for quite some time.
>> i get a sense from talking to people about the markets and also reading up on things on a daily basis that there is still a sense of skepticism out there, that certainly not the euphoria we’ve seen. what is your sense of it? is that better?
>> oh, yeah. i pray it continues. if everybody buys into the fact that this is a screaming bull and maybe one of the best ones in a long time, then we will have that 10% or 15% retraction everybody’s been looking for since june. one of the reasons i’ve stayed bullish in the short run is i think everybody is timing the correction and it’s not likely to reward people when you see the rydex ratio jump up and the put-call ratio jump up as people try to call the top, i don’t think they’ll be rewarded.
>> when is the correction coming? the first half of 2004, sooner, later?
>> i’d be surprised if we got it before the second quarter of next year. i can’t tell you that. i hope i’ll be able to listen to the message of the market and begin to perceive change and group rotation as it happens. we’ve seen, i think, a little bit of group rotation over the last couple of weeks, but nothing necessarily that will have legs to it but it will take longer to tell. energy stocks have been a good example. over the last couple of weeks, you’ve seen life in the oil service area.
>> we have a bar chart on the bloomberg right now of the oil services index giving us a sense from the beginning of this year and we have a 200-day and 50-day moving average on this and there is a breakout above those averages.
>> my feel is that if we can get up through that 92, 93 level, we may have a meaningful rally here and we may know in short order. those stocks have been doing well in the last week or so as the market has pulled back on technology and you’ve seen money rotating into large cap stocks but the o.s.x. has been a pretty good indicator and if we fail below the 92, 93 level, then this is just a trading move but if we get above it, we may develop something of a more secular nature. the m.p. stocks are sitting up at new highs. today, you had international integrated oil, big cap stocks like b.p., for example, moving up to a 52-week high on heavier-than-normal volume so things are happening in in that area that cause me to want to be in tune to the possibility that there might be a meaningful rally coming.
>> can technology continue to lead as it has in 2003?
>> i think it can. i don’t think it’s mutualualy exclusive that one or the other have to lead. but i have noticed that like gold stocks , when the oil service stocks get very low in the group ranking, they tend to go to extremes. gold stocks tend to go from the top 10 to bottom 10 and don’t spend time in the middle. that’s what the oil service stocks and drillers do, also.
>> aside from a catastrophic event, what could derail this situation? inflation showing, continued weakness in the dollar? what could derail the situation?
>> when you said the situation, you mean the market in general?
>> yes.
>> i don’t see anything right now that’s likely to derail it, lane. i think corporations are poised to show phenomenal earnings acceleration over the next few quarters.%
>> john wilson, thank you very much.
>> thank you.
>> director of equity strategy at morgan keegan. thailand’s margeest commercia commercial―largest commercial lender is betting on economic rebound there.
