Agora Outlook

November Expiration
October 24th 1997

Newspaper headlines proclaimed, "Crash of ’97" and "Meltdown in the Market,"! They forecasted tougher times for mortgage payers, restaurants, and the luxury car market because of higher interest rates. On Thursday the Hang Seng "crashed"! It fell as much as 14% to a low of 9,767 in early trading before cutting some losses, recovering slightly to close off 1211.47, or 10%, to 10426.30, its lowest level in 19 months. The index had shed a total of 23% this week before it rallied back on Friday. Interest rates soared in defense of the Hong Kong dollar's peg to the U.S. dollar, creating a frenzied free fall sell off of shares, and people lined up at banks to deposit money with an eye to reaping huge interest earnings. The overwhelming view of the market was that the rocketing interest rates were the trigger for the selloff. Many banks raised prime rates by 75 basis points to 9.5%. Hong Kong overnight rates surged to 250 to 300% by noon, after trading at 6.0% Wednesday morning. According to brokers, the fall was more damaging than the 1987 crash when the Hang Seng Index plunged 1,120.70 points, or 33.33%, to close at 2,241.69 on October 26, known as Black Monday. This will really hurt domestic investors. "Sentiment is very bad," said Allen Pao of institutional sales at South China Brokerage. "Interbank rates have gone to a feverish high. Today’s plunge followed three days of falls that had already shaved 14% from the Hang Seng since last Friday. The market has lost 37% of its value since hitting a high of 16,673.27 on Aug. 7. The important thing is that economic fundamentals remain strong and that they maintain absolute determination to defend the Hong Kong dollar.

Elsewhere, the main Philippine index plunged 96.06 points, or 4.98%, to 1,832.91, a four year closing low. Malaysia, one of the countries worst hit in the turmoil that began in July, broke through the 500 level, falling 12.27 points, or 2.43%, to 492.96. The ringgit hit its lowest level against the U.S. dollar since the Malaysian currency was floated 24 years ago.  Buying by government related funds enabled Taiwan stocks to weather Hong Kong’s meltdown. The composite index closed 132.54 points, or 1.72% higher, at 7,825.01. Even Australia got into the act. The decline on Hong Kong stocks pulled the Australian market down 2.5% with the Exchange's main barometer, the All Ordinaries index, closing -68 points down at 2614.9, and the Australian dollar lost another half a cent against the U.S dollar to finish at 70.6 U.S cents. International investors are taking a negative view of Asia overall and are lightening allocations. European markets also suffered badly in the aftermath of Hong Kong’s slide but selloff was more emotional than fundamental.  The London Stock Exchange dropped 199.8 points, or 3.9% as it tumbled to an early low of 4,949.0. "The fear is that this is going to affect world markets," said Glen Poulter, a stock dealer at Schroders in London. "I spoke to traders yesterday and none of them were talking about Hong Kong. Today, that’s all they’re talking about." Share prices in Paris dropped over 2%, the German DAX index was down 124.71 points, or 3%, to 4,046.74, and the French CAC 40 index fell 62.89 points, or 2.1%, to 2,895.17. When U.S markets opened bonds were already up strongly as investors rushed to a safe haven.  The Dow fell strongly down, -160 points in the first half hour of trading, S & P 500 -18.00.  The markets stabilized until after lunch and then headed south again taking the Dow down -225 points, S & P 500 -24.00.  After Wednesday’ big drop, the FTSE 100 was trading just over 200 points below its record high of 5,367.3. The Dow Jones industrial average is trading little more than 200 points off its peak also. Another worry is that markets worldwide are trading near all time highs. In the wake of the sell off in Asian stock markets, one market was up. The U.S. Treasury market was up 1 1/4 points. Its yield, which moves in the opposite direction of its price, fell to 6.33% from 6.42%. Gold made a showing also. It climbed early Thursday as dealers sought some safeguard from the Hong Kong market’s collapse. Spot gold rallied to a high of $324.25 but profit taking capped the market’s run.

Overall the change in Asian Markets was as followed:

  Australia All Ordinaries 2614.90 - 2.53%
  Hong Kong Hang Seng 10426.30 - 10.41%
  Indonesia JSX Index 494.137 - 2.20%
  Japan Nikkei 17151.55 - 3.03%
  Malaysia KLSE Composite 706.45 - 3.38%
  Philippines PSE Index 1832.91 - 4.98%
  Singapore STII 1649.87 - 4.72%
  S. Korea Korea Composite 604.06 + 0.46%
  Taiwan Weighted 7825.01 + 1.72%
  Thailand SET 511.56* + 0.71%

The Comeback

 Hong Kong shares, after an uneven start, started to crawl upward on Friday, dragging several other markets up with it. The Hang Seng Index closed Friday up +718.04 points, or 6.89% at 11,144.34, up from a 10,897.05 midsession close. The rally was prompted by both fundamental improvements in the investment scene and purely technical factors, both of which could reverse at any time, analysts said. Short covering in the morning quickly lifted the index from an early low of 10,187.90 to a high of 11,147.82, up 721.52 points or 6.92 percent, before retreating in late morning. Traders in the rest of Asia and Europe took heart from Hong Kong’s rebound. The Hang Seng rebounded to the relief of Tokyo investors, and this brought on bargain hunting and short covering. Tokyo stock prices recovered after hitting a two year low Thursday. The Nikkei rose +212.19 points, or 1.24%, to close at 17,363.74. But in Singapore, stocks took another hit on Friday as investors stayed shy on worries of further weakness in the Singapore dollar after it slipped to new lows this week. Malaysian stocks were down 1.9%, while Philippine stocks finished the day 0.8% higher after Thursday's 5% loss. There was calm Friday morning in London. It was up +92.4 points at 5,083.9 by midday. Germany’s DAX closed up +73.61 points, 1.85% at 4,050.87 points. Hong Kong's stock market may have bounced back Friday, but with Thursday's spectacular plunge coming just a few months after the territory returned to Chinese sovereignty, it's natural to ask whether the transition to control by Beijing helped caused the crisis. For years, Beijing tried to convince the world that after its July 1 takeover of Hong Kong, the former British colony would remain economically the same. The one exception was to support the Hong Kong dollar if there were a speculative attack. On the contrary, China is in a position to help Hong Kong out of the crisis if it continues, and it has the economic strength to do so. A better question is whether it will. Seeing Hong Kong in difficulty and then helping out might give Beijing some political face. Basically, if it had all been up to China, Hong Kong would have continued with "business as usual." Beijing was clearly counting on capital generated in Hong Kong to finance huge projects on the mainland and advertise its readiness to do business with the world. The result was that investors did not flee at the prospect of the Communist government wielding control. If anything, money was pouring into the colony, evidenced by the soaring stock market of the last year. Now that currency speculators have attacked both the weak and the strong in the region, even Hong Kong has been forced to raise interest rates and spend part of its reserves to defend its currency. How far will Hong Kong and China go to defend the dollar peg? If the slide continues, the depression will spill into mainland China. The most obvious impact would be on its ability to raise badly needed capital in Hong Kong. This could worry away foreign investors.

On Friday the Dow rallied by 120 points shortly after the opening bell, as fears of another drop in Hong Kong’s financial markets went away, at least for one day. But by late morning, it moved down -120 points. It ended up closing down -132.36 points to 7715.41. Most markets worldwide had recouped between 40% and 60% of the declines posted Thursday. With the Dow’s continued fall some market players are optimistic that a bigger chunk of the 187 points lost by the Dow could be recaptured. U.S. bonds should continue to benefit from a flow of foreign capital looking for a "safe haven" from the unrest in the far East. That trend helped the bond market post a big gain Thursday and Friday. Stocks were down Friday morning as the Dow still has lingering concern that the crisis may not be over. This entire week has reminded investors that the world's biggest stock markets are vulnerable to events in far away markets and of the need to find safer havens. Normally, investors would also use gold as a safe haven but the precious metal was under the gun Friday. A Swiss proposal to sell 1,400 metric tons to get off of the gold standard was approved by a nationwide referendum set for 1999. Gold retreated to the lowest level in more than a decade at $308 an ounce. But if the Asian financial turmoil triggers a bigger freefall in stocks, gold will could take its historical role and outperform. Gold has traditionally risen when stocks have been going through rough times.

Economic Effects

Tuesday Btm Schroeder weekly chain store sales came in down +0.2% and Johnson Redbook sales were down -.02%. The indicators balanced each other out. They were little changed so they didn’t affect the market much. The report on the U.S trade deficit had more of an effect on the market as it came in strong once again. It grew to 10.36 billion. The highest number since January. With Japan we had good news. The trade deficit fell -12.5% to 4.5 billion. However, once again the gap with China grew 9.6%, to 5.26 billion. This number held bonds back most of the day. On Thursday weekly jobless claims came in up +8,000 to 315,000 for the first time in two months. Four week average 308,750. The number was ignored as the Hong Kong market had crashed a full 10% the night before and the market was reacting to that news instead. The indicators out this week were too insignificant to affect the market.

Next week’s Economic data

We start out on Monday with a good indicator for following consumer spending in the economy. Existing home sales. The number has moved markets before so we could see some interesting reactions. Tuesday has weekly chain store sales reports, employment cost index, and consumer confidence. All of these numbers are important right now in the context of rate hike worries. The ECI number will be the most important. If wages are rising, that will almost confirm a rate rise in November. Wednesday has durable goods out. This indicator has moved the markets good and bad in the past because of its volatility. Thursday has weekly jobless claims, the help wanted index and new home sales. The new home sales will help to confirm the existing home sales that were out on Monday. Friday will give us the first reading of 3rd quarter GDP and consumer sentiment. The past GDP numbers haven’t moved the markets much but this one could if it’s strong enough. Economists are still debating if the quarter had much strength or not. The indicators out this week will have a great effect on the market either up or down. It is already skittish about the strength of the economy and interest rates. The melt down in Hong Kong may actually turn out to be a good thing for the U.S economy. Slower growth over there will help to bring our GDP down at least a half percentage point and bring cheaper goods to our shores.

Technically

Short term the market has moved into a strong oversold condition. Arms, and the Mclellan Oscillator are deeply oversold. The Vix is showing an interesting pattern that could come into play in the coming weeks. It has been slowly moving lower indicating a bullish mood developing in the overall market. Of course, short term the vix is very high representing the short term volatility we have been experiencing due to the Hong Kong debacle. We have been saying that the market could stay in an oversold condition for a time as sentiment has changed the past few months. We may need to see deeper oversold conditions to spot any possible rallies in the future. Next week the market should find a short term bottom as it tests old lows.

Mclellan Oscillator: -187 -100 oversold +100 overbought

Summation Index: 2764

Five day arms: 1.20 .80 and below, overbought 1.00 and above, oversold

Ten day arms: 1.12 .80 and below, overbought 1.00 and above, oversold

Bulls: 46.6 previous week 48.6 50% plus overbought/bearish

Bears: 29.7 previous week 31.4 50% plus oversold /bullish

Correction: 21.5 previous week 22.0

Five day Qvix: 23.48 10-15 bullish, low volatility 15-40 bearish, high volatility

Davidson’s View

Well, we can now say that we’re going through a crash even though it’s not ours! This last week the Hong Kong market has been given crash status in my book. To lose 23% of your value in 4 days is definently crash material. It’s also good to see that "crashes" haven’t changed how they operate. The Hong Kong market first fell 4% to scare investors. The second day saw a 2% drop. Then they had a strong loss to suck in the bears, 7%. The next day she went into a tailspin falling 14% at one time but coming back a bit to only close down 10%. One scary thing about crashes is that just when you think the "correction" is over and you should be forming a bottom,"It" takes hold again and takes you way down. I could have made a fortune if I was trading Hong Kong on Friday. I knew that the market would be up today. It came back 6%! Nicely up but not enough when you’re in the middle crash psychology. Next week should be the end of the crash for Hong Kong. The question is will it go back down and retest its lows? With Friday’s selloff in the Dow it should retest. If it doesn’t they may find themselves in a true bear market for a time. They may even become like Japan and continue grinding downward until they’ve cut the index in half. If Hong Kong is truly like our North American indices we should see a retest and the beginning of a new rally. If not it will be the start of a growling bear. Let me know what you think!!

MARKET CLOSES

Current Trades

This has been a great week for our trading.  At the bottom of the market on Monday morning we were able to squeeze in a short put trade.  After the strong two day rally upward we were able to place our long call trade at the top of the market.  With the big selloff on Thursday we got the other side of our long trades with our puts being filled.

The market turned out to be quite flat despite the big sell offs on Thursday and Friday. Our long trades are looking like we could have a 33% profit this month and the short trade will be 30% alone. We put the trades through the program to see the probability of success in case some of you are nervous about the put trades. The long call trade, 1005,1010 is showing a high 94% success rate for the November Expiration. The Long put trade is also high. Currently sitting at 88% probability. The short put trade looks a little riskier. It has a 73% probability of success. We think as we move into the strong seasonal period of the market (middle November - December) we’ll begin to move higher.

Program Trades

Copyright c 1996. All rights reserved. The information contained in the AGORA OUTLOOK NEWSLETTER is based upon data that is believed to be accurate, but is not guaranteed, and subject to change without notice. All projections, forecasts, opinions, and track records cannot be guaranteed to equal our past performance. Persons reading this newsletter are responsible for their actions. Officers and employees of this publication may at times have a position in the securities mentioned, or related services.

Agora Outlook

November Expiration October 31st. 1997

Well, one of the most tumultuous weeks in Wall Street’s history is now behind us! Sharply down on Monday, sharply up on Tuesday! Wednesday and Thursday saw extra ordinary volatility and then today we almost lost all of our strong gains. Even though the Dow was off over 7% on Monday alone it came back to being only down only -3.5% for the week. So what started the fall? A week ago Hong Kong’s Hang Seng index fell more than 23% in the first four days of trading. That Friday the U.S. markets closed sharply lower even though Hong Kong had recovered some 7% of its losses. The Dow slid more than -132 points to 7,715.41, its lowest level since Aug. 29. The Dow’s fall on Friday didn’t help the Hang Seng on Monday! It renewed its downward slide, falling 5.8%, or 646.14 points, to 10,498.20 and other Asian markets followed suit. The sell off led Japan’s index down 325.38 points to 17,038.36, a 1.9% decline, and Australia’s All Ordinaries index off more than 3% to 2477. Then, it spread to Europe’s major markets. Germany’s Dax index fell more than 4.2 percent to 3879.12, the Paris CAC 40 slid more than 2% while London’s market was down 1.3% late in the trading session. Brazil’s Bovespa was off 5.5% while Mexico was down 3.5% early in their trading days. For the first time in history, trading on the New York Stock Exchange was halted as the Dow’s decline topped 350 points at about 2:35 p.m. After trading resumed at 3:05 p.m. ET, the decline continued and trading was halted again at about 3:30 p.m. with the Dow down more than 550 points. The Dow ended the shortened day down 554.26 points, or 7.2%, to 7,161.39. The S&P 500 fell 64.65 points. The decline was the Dow’s largest in history in terms of points, eclipsing the 508 decline on Oct. 19, 1987. The Dow was down 13.3% from its all time high of 8,259.31 hit on Aug. 6. The index was at its lowest level since May 9 closing at 7,169.50. On Tuesday the Dow opened down more than 65 points, then proceeded downward as its stocks opened one by one. Less than 15 minutes into the trading day, the blue chip index was down more than 100 points. The index was down about 180 points when it began to bounce.  The S&P 500 was up more than 7 points. The action overseas did little to calm jangled nerves. Overnight, Hong Kong’s Hang Seng Index fell another 13.7% and once again sparked selling worldwide. Elsewhere in Asia, Japan’s Nikkei 225 Index fell 4.3%, Malaysia’s KLSE Composite dropped 6.6%, Singapore Straits Times fell 7.6%, and Australia’s All Ordinaries lost 7.2%. The performance in Europe was similarly bad. Germany’s DAX Index opened down more than 13% and recovered 5% at its close. France’s CAC 40 fell more than 9% while London’s FT-SE 100 index was off more than 7% heading into its last hours of trading. The difference between 1987 and 1997 was in how market players reacted to the sharp falls. In 1987 the mood was one of panic. This time there was a sense calm and order. Until the dust settles in Hong Kong and the rest of Asia don’t expect the market to pick back up. The market is definitely sloppy. It’s time to buckle your seat belt and hang on for the ride. The Dow closed the day strongly, rocketing +337.17 points to 7498.32, recovering more than 60% of Monday's 554.26 point plunge. Volume made a record on Tuesday executing 1 billion shares. The advance was the largest ever on a point basis, topping the +257.36 it had jumped on Sept. 2. The percentage gain for the day though was far less impressive, 4.71%, ranking only as the 70th largest on record. IBM’s announced stock buyback was widely credited with sparking the Dow’s incredible move Tuesday from down 180 to up 337. But after the big drops Monday and early Tuesday, it was the buyers being lured back in that had brought the market back. For years, stretching back to the 1987 market crash, investors have been richly rewarded for buying stocks when prices take a tumble. This "buy the dips" mentality has helped prices to recover quickly each time the market has made a drop. So the pros played their game, took some profits, and watched their short positions bear fruit. Now the market can resume its steady appreciation all the way to the next sell off, when the cycle will begin again!

Economic Effects

Monday had existing home sales come out up +.02%. It was much stronger than expected. Analysts were expecting them to be down -1.2%. For a brief time the number pulled bonds out of their strong rally being up almost one full point. Bonds were up strong at the start of trading because the Asian and European markets had crashed overnight and traders were looking for safety within bonds. Tuesday had the employment cost index come out as expected at +.08% This brought the annual number to an even +3.0%. Benefits were up +.04%. The number was right in line with expectations at +.08 but getting a little tight on the annual number. The market pretty much ignored the number as it had lost over 7% in a sell off the day before. Also out was consumer confidence which gave good news for bond bulls. It fell from last month’s 30 to only 23.3. On Wednesday durable goods fell an unexpected -0.6%. The number was great for bonds since it gave the appearance that the economy is starting to slow a bit. The number was expected to be up. On Thursday weekly jobless claims came in down -16,000 to 297,000. Four week average 305,250. This number was much lower than expected and was the lowest unemployment number of since 1988. Also out were new home sales. They came out down -.02%. They had been expected to rise. The number made overall home sales this month neutral as existing home sales were up an unexpected +0.2% on Monday. On Friday the strongest consumer spending in 5 1/2 years, 5.7%, propelled economic growth to a robust 3.5% annual rate in the third quarter while inflation all but disappeared. Normally, such rapid growth would raise inflation warning flags and draw interest rate increases from the Federal Reserve. But analysts believe the stock market’s recent sharp decline which eliminated part of consumers’ wealth should help slow growth next year to a rate monetary policy makers view as more sustainable. The inflation price deflator has consistently improved over the year. It rose 2.4% first quarter, 1.8 percent in the second and 1.4 percent in the third, the lowest since 1964. Consumer spending, accounting for 2/3rds of the economy’s output was the driving force in the third quarter along with business investment. The good news in this report is the deflator. It's probably the best reading we have on inflation and this index is still running well under 2% for the year. Also out was consumer sentiment. The number is still holding above 100 but did turn down this month. It came out at 105.2. A preliminary number to the national association of purchasing numbers due out next week was the Chicago purchasing managers report. It came in lower than expected at 56.0. Last month’s number was 61.2. The numbers this morning were great news for the market. Bonds still sold off however, mainly because money was again being diverted back into stock. This is the first time in quite a while that stocks and bonds have seen such a divergence! Overall this week’s numbers were lower. Normally this would be good news but it was pretty much ignored as the world market selloff stole the stage first thing Monday and continued all week!

Next week’s Economic data

Monday has personal income out with the national association of purchasing managers report. A secondary number out is construction spending. These numbers could shake up the markets first thing. The past few months the market has shown great interest in the NAPM number. If it’s a strong number, the market could head south! Tuesday has weekly chain store sales reports and leading indicators reports. Thursday has weekly jobless claims. If the number comes in strong once again the market may not ignore it as they did this past week. Labor markets are getting tighter and tighter and we al know that this is the feds #1 concern. Friday has wholesale inventories, consumer credit and the all important employment report. This is the most important indicator of the entire month and the market has been so edgy of late we could have a volatile day ahead of us.

Technically

I’ll bet we don’t have to tell you that the market is now severely overbought.....just kidding, oversold! With the huge downdraft this week it’s all you can expect. Our vix indicator turned on a dime and hit some of the highest levels ever, since 1987. We think that it will begin to trend downwards again soon. The Mclellan Oscillator was hitting -200 this week but in extreme oversold condition the number is meaningless. Last summer it was hitting +200 but it was quite a while before we started to move lower. Arms is also showing an extreme oversold condition. Technically we should get a bounce here sometime soon with plenty of intraday volatility. We appear to be forming a bottom around the 900 level on the S & P 500. This should shape into the start of a new steady rally upwards. We will see extreme oversold and overbought situations in the next few weeks.

Mclellan Oscillator: -112 -100 oversold +100 overbought

Summation Index: 1607

Five day arms: 2.56 .80 and below, overbought 1.00 and above, oversold

Ten day arms: 1.88 .80 and below, overbought 1.00 and above, oversold

Bulls: 43.2 previous week 46.6 50% plus overbought/bearish

Bears: 32.7 previous week 29.7 50% plus oversold /bullish

Correction: 24.1 previous week 21.5

Five day Qvix: 35.03 10-15 bullish, low volatility 15-40 bearish, high volatility

Davidson’s View

So the question is, was this a crash? Actually, I have a new name for it. A crash/correction! We continue to call it that because there is a difference.  A sharp correction sees a severe price decline somewhat in the range of 5-10% in one day.  You then go through the motions of a bounce, one to two days.  Then a retest. That is, Anything starting with a sharp selloff lower. Finally, you get the meandering stage.  This is where the market can't decide to go up or down but intraday volatility is high.  Generally these periods move the market slightly higher as it is so oversold and psychologically damaged that there really is only one way to go.  This can last some ime.  technically the indexes, they build a wedge formation that is generally bullish and when they get to that tip of decision, you normally get a breakout to the upside on heavy volume as everyone has forgotten even why the market corrected so badly in the first place. The crash/correction we just experienced started on the Wednesday and hit its bottom the following Monday. The market took about 10% off of its value in 4 days! We hit new highs Oct 5th on the S & P 500, at 983.11. This last Monday’s low close was 877.14. In total we lost about 11%.

Corrections are much different.  Crash/corrections are done and over within a week.  You can tell where you’re going.  Corrections can last a long time.  For example the 1990 correction was long and drawn out.  It pummeled the market.  Day after day it would go nowhere or only be down 1-3% each day.  The market generally hit a peak in late May 1990 and then went sideways until making a double top in July.  It then grinded slowly down..... until January 1991.  That made it a 6 month correction which ended up taking about 20% of the value off of the market. In comparison to the 1987 crash which was finished in a week, there is a big difference.  We must note that in December 87 the market did go back down to retest its lows but that was also finished in a few short days. Rapid crash/corrections usually turn on a dime and begin to rally. The problem with slow corrections is that it is hard to tell when the rally will begin. We should see a move higher in the near future. Bonds are low, economic growth has slowed giving us no interest rate worries and even Allan Greenspan seemed happy this past week because the market’s crashed, reducing what he terms the "wealth effect."    

MARKET CLOSES

Current Trades

Our call trades look great! Our long puts are also in a good position. The S & P 500 seems to be trying to find a base around the 900 level. Our shorts are a little under pressure but you can tell that we’re shaping a bottom here as put prices are out of this world! Our program is showing a 99% probability of success for our 1005, 1010 call trades. The 900, 895 puts are showing an 89% probability of success. The shorts are a little under the gun and are now showing a 71% chance of success. We are surprised it is this high! There are still 15days to expiration so we still have lots of time left for success for the puts. We are currently studying why our program gave such high call numbers to short and such low puts to short. And why there was a short put trade given. Maybe it’s trying to tell us something! I guess thats why it gives us a 93% reliability rate! We always say that it is important to develop a trading system and stick with it no matter what happens. Don’t let emotions sway your decision making. Thus, were sticking to the program numbers!

Program Trades

Current

Copyright c 1996. All rights reserved. The information contained in the AGORA OUTLOOK NEWSLETTER is based upon data that is believed to be accurate, but is not guaranteed, and subject to change without notice. All projections, forecasts, opinions, and track records cannot be guaranteed to equal our past performance. Persons reading this newsletter are responsible for their actions. Officers and employees of this publication may at times have a position in the securities mentioned, or related services.

Agora Outlook Track Record

Agora Outlook

November Expiration November 7th 1997

What a surprising conclusion to the week! Overnight the Asian markets fell again! (Korea alone lost 7.0%.) Tokyo's Nikkei fell -697.51, 4.2% to its lowest level in 28 months on Friday to 15836.36. It finished below 16000 on July 6, 1995, when it closed at 15256.89. The 16000 level is believed to be crucial for the market because below that level, many banks have unrealized losses on their stock holdings. This dragged Southeast Asian stocks lower on renewed fears that struggling Japanese financial institutions may sell off equities to improve their balance sheets. Hong Kong's Hang Seng fell nearly -308.06 or 3% to 10104.50 on worries about local interest rates and the 7% slide in South Korea's equities market. The Hong Kong dollar is the last major currency in Asia still pegged to the U.S. currency. Its failure to depreciate along with other Asian currencies has made it a target for speculators. The government's defense has resulted in higher interest rates. Other Asian markets were hurt by the drops in Tokyo and Hong Kong. The key index in Australia fell 2.2%, in Taiwan, 2.7%, Indonesia, 2.7%, and Malaysia, 3.2%. European markets extended early losses in midday trading Friday amid fears of a possible global market decline. London’s market fell 1.8% and Frankfurt was down 2.3%. The Paris market was down 2.4%.

Saddam Hussein contributed to Asia’s slide by threatening to blow up our UN spy planes. They felt the U.S was taking pictures to plan an assault against them. A senior Pentagon source meanwhile declared that the United States would see it as an act of war if they carried out their threat to fire at U-2 surveillance flights. When president Clinton was asked if he thinks Saddam Hussein may be willing to give ground in the potentially explosive showdown he replied; "NO, I DON’T,"! The Iraq army may have no choice in side stepping military action against them unless they back down on their threats over the weekend.

If this wasn’t enough, at 8:30 am EST we received a very strong unemployment report. The globex trading system for the S & P 500 was already lock limit down its maximum -15 points before it came out. It was in reaction to the Asian fallout and Iraq’s threats. Bonds were up a half point before the report but then fell momentarily as it revealed there was a lot of strength in the economy. Non - farm payrolls totaled 284,000 last month; some 80,000 above the consensus estimate. September’s figure was revised upward to 269,000 from 215,000. In addition, the unemployment rate fell to 4.7%, its lowest level in 24 years. Adding to the market’s jittery response to the report, average hourly earnings rose a higher than expected 0.5%. Economists are now divided over whether the stock market drop and a predicted sharp decline in U.S. exports to Asia will slow economic growth enough to prevent labor markets from tightening further.

The unexpectedly strong report was sure to raise new concerns about labor shortages. Not surprisingly, right after the data was released, bond prices quickly lost most of the early morning gains they'd earned. Bond prices bounced back somewhat, later in the morning.

The market’s resiliency to the load of bad news had traders expressing little concern over the drop in prices. That might seem like good news, but on Wall Street, it prompts worries about the possibility of inflation ruining the good times. There were even some murmurs on trading floors Friday morning that the Federal Reserve might be inclined to raise interest rates when it meets on Nov. 12, an idea that was all but unthinkable just a week ago. The Bank of England’s rate hike Thursday and the stock market’s rebound from the Oct. 27 decline have also fueled concern among some players that a rate hike is for sure! Such a move would be despite the instability in world economies and the expected disinflationary impact of Southeast Asia’s retreat. The Fed’s job is to fight inflation. It cannot be viewed as resisting economic growth.

Economic Effects

On Monday personal income came out up +.04%; personal spending up +.02%. These numbers were in line with expectations. The national association of purchasing managers came in at 56.0 up from last months 54.2. The number was a bit stronger than expected. Construction spending was down -1.1%. It was expected to be lower. Even though the numbers were stronger than expected the market reacted little as it was still dealing with the market selloff the week before. Tuesday had Btm Schroeder weekly chain store sales come in down -0.1% and Johnson Redbook sales were up a strong +0.7%. Leading economic indicators came in up +.02%. The number is not so leading anymore so it was disregarded by the market! The Johnson Redbook number revealed that retail sales are picking up once again. This could be because of the upcoming Christmas shopping season. Isn’t that scary; here it comes again! On Wednesday Factory Orders came out up +0.4%. It was completely opposite of what was expected to come out being down -.04%. The market actually sold off slightly for a few minutes but then went back on its own track. On Thursday weekly jobless claims came in up +16,000 to 315,000. This number was unexpected since was supposed to be down. It could have been good for the unemployment report on Friday which had the possibility of being strong. The market was down all day because England raised interest rates a quarter point. Friday had the much awaited unemployment report. It came in at 4.7% and 284,000 jobs created. It was the lowest level since October 1973, when it was 4.6%.  Rising further than expected, average hourly earnings edged up .06 cents to $12.41 per hour. This raised the annual rate to 4.2%. The average workweek was unchanged in October at 34.5 hours. This raised new concerns about labor shortages and inflation. The data was much stronger than expected. The stock market was already under pressure from weakness overseas, so bonds were seeing a struggle between a flight to quality from equities versus a stronger than expected employment report. At first, bonds fell almost a full point when the announcement came, but they came back as fast as the stockmarket sold off. It was quite an active week for indicators. Even though they were all strong, in general, all of the money looking for a safe refuge in bonds put indicators into the back seat once again.  

Next week’s Economic data

On Tuesday we have weekly chain store sales reports. Wednesday has no economic reports but there is a Federal Open Market Committee meeting. Before the big market selloff it appeared that the odds of the Fed raising were quite strong! Now they appear to be rather low. Thursday has weekly jobless claims, Atlanta fed survey, productivity & costs. The productivity & costs number will be the standout today as it could move the market if there are any surprises in the number. Friday will have Producer prices and consumer sentiment. For the week, these are the most likely numbers to really move the market. Everyone is still waiting for inflation to rear its ugly head and maybe, just maybe this will be the time. It will be a quiet week until Thursday and Friday, the most significant number being the PPI on Friday.

Technically

We were getting quite a bounce out of the market this week until it began to fall on Friday! It appears that were setting up a second leg down here to set a bottom in the market. We don’t necessarily have to go all the way down to retest the lows that were set, but if we did it would certainly scare a lot of traders. Indicators are mixed this week. Most had regained ground to the neutral area but with the sell off Friday they are heading back down once again. Typical from being in such an oversold condition. The only indicator that appears to be reaching into overbought territory once again is stochastics.

We found an interesting table this week from Yale Hirsh’s stock traders almanac. He is famous for stock market historical moves! This table reveals gains or losses in the S & P 500 for each month from January 1950 - April 1996. September has typically been a down month but as you get into November it begins to pick up. November is the third strongest month of the year. This is an interesting seasonal fact that we should consider since the market is falling all around us.

Mclellan Oscillator: -98 -100 oversold +100 overbought

Summation Index: 1514

Five day arms: .96 .80 and below, overbought 1.00 and above, oversold

Ten day arms: 1.76 .80 and below, overbought 1.00 and above, oversold

Bulls: 44.3 previous week 46.7 50% plus overbought/bearish

Bears: 34.7 previous week 31.7 50% plus oversold /bullish

Correction: 21.0 previous week 21.6

Five day Qvix: 31.78 10-15 bullish, low volatility 15-40 bearish, high volatility

Davidson’s View

So we ended the week on another down Friday. We know what happened 2 weeks ago when we closed down on Friday! Everyone’s eyes will probably be popping out of their heads Monday morning in anticipation to see what the market is going to do. Instability in global markets was largely blamed for Friday’s -102 point drop in the Dow, even more so than the release of a stronger than expected U.S. employment report. The lack of comfort will probably continue next week. Late Friday, Brazil’s government said it may announce a series of fiscal measures designed to shore up currency as early as Monday. Speculation of a devaluation of Brazil’s real seemed to be more of a problem to traders Friday than the sliding Asian markets. Many people worry that the big concern for many players is what impact the Southeast Asian slowdown will have on Japan and China, both far bigger trading partners for the United States than the region’s other economies combined. Our multinationals have only about 20% exposure there. The odds of the Fed raising when they meet on Wednesday are next to nil again. I personally don’t think the market will even acknowledge their meeting. If they did raise I think that the market would utterly collapse. The Bank of England’s rate increase Thursday and prior increases by other central bankers in Europe could give the Fed some leeway to lift rates anyhow. The dollar has been rallying strongly of late so higher interest rates in the U.S would make dollar denominated assets like stocks and bonds even more attractive to the global community and that wouldn’t help their markets at this time. However, the Fed did continue to raise rates in late 1994 and early 1995 despite the peso crisis in Mexico, an event widely believed to have had a greater impact on the U.S. economy than will the slowdown in Asia. The most important thing, however, is that there simply isn’t enough evidence of inflation to justify a rate increase next week. I don’t really think the market is going to go anywhere in the next couple of weeks the closer we get to expiration. We may have a lot of intraday or intraweek volatility however. We could be in a sideways market for some time the way things are turning out! Yes!! A credit spread traders dream! My commentary here is a little shorter than normal because I know I’ll be sending out numerous comments in the next couple of weeks!

MARKET CLOSES

Current Trades

The market saw strong volatility this week but still ended up slightly. With the small rise and the volatility index beginning to flatten out, option premiums began to fall back into place. The market remains just off the center of our long program trades. We closed our short 925/920 put trade on Monday’s big rally to play it safe in case we did see a retest occur. We still succeeded in gaining 15% on the trade. We ran the numbers through the program quotient once again and came up with the following figures. Our long trades with the 1005/1010 calls has moved to a 98% success rate for this trade. Our long 990/890 puts also increased in probabilities. They are now sitting at a probable 90% successful trade.

Program Trades

Copyright c 1996. All rights reserved. The information contained in the AGORA OUTLOOK NEWSLETTER is based upon data that is believed to be accurate, but is not guaranteed, and subject to change without notice. All projections, forecasts, opinions, and track records cannot be guaranteed to equal our past performance. Persons reading this newsletter are responsible for their actions. Officers and employees of this publication may at times have a position in the securities mentioned, or related services.

Agora Outlook

September Expiration November 12th 1997

Is a slowdown in the U.S on its way? Increasing signs says it is. Many companies have been announcing layoffs and others are under increased pressure from shareholders and foreign competition to keep profits from sagging. No one expects it to be like the layoffs that occurred in the early 1990s, but some economists and management consultants say they expect more in coming weeks and months. Just this week alone there were a number of announcements made about layoff’s. Eastman Kodak said it will cut around 10,000 jobs. Fruit of the Loom Inc. will cut 2,900 more U.S. textile jobs, Waste Management Inc. said it will take out 1,200 jobss, and Kemet Corp., an electronics parts maker in Greenville, S.C., announced a reduction of 1,000 workers. Just today IBM announced that it has begun sending layoff notices to hundreds of employees in its North American division as part of a major restructuring of the units sales and distribution organization. The layoffs come just weeks after IBM said various divisions within the company would offer voluntary job buyouts to cut costs. Kmart Corp., in a move to further reduce its high operating costs, offered early retirement to 28,500 hourly employees, or 11% of its work force. They said that they plan to replace the workers who take early retirement with new, lower paid employees. Since summer alone there have been over 35,000 jobs affected. All of the announcements above are coming at a time when the economy is strong, inflation is low, and unemployment is only 4.7% of the labor force, a 24 year low. A survey taken in mid-October of 400 chief financial officers from companies of all sizes showed that about 2/3rds of the companies expect to add personnel in the next 12 months. The survey, by the Financial Executives Institute and the Fuqua School of Business at Duke University, indicated only 10% of the companies intended to cut their work forces over that span. Still, even economists who are bullish on next year's economy are expecting layoff announcements to pick up. The Conference Board's chief economist, Gail Fosler, said, "People will see the economy doing pretty well next year, but they will wonder at all the corporate restructuring and layoffs they see." The answer to that puzzle, Ms. Fosler adds, is that "this business cycle has been unique in not having pricing power. Next year, there will be more intense import competition, and businesses have to drive earnings up. The only way is to cut costs." If layoff announcements pick up, they could be the answer to Fed Chairman Alan Greenspan's question, 'Where will the workers come from? In recent months, Mr. Greenspan has expressed concern that a shortage of workers could be developing in the U.S., a trend that could boost wages and ignite inflation. Too many layoffs, of course, could dampen the economy by slowing down consumer demand for goods and services. So far, though, the outlook is for a slowdown in economic growth next year to a moderate 2% to 2.5% growth level, but not a recession. There are two other forces setting the stage for more layoffs and layoff announcements next year. One is the spreading contagion to the world economy of a slowing growth rate in the Southeast Asian countries. The problems in Southeast Asian economies could spread to the point that U.S. producers are under pressure to lower prices for export and to compete with cheap foreign goods at home. Because of this we should watch what happens overseas and be prepared for what could happen to jobs!

Economic Effects

This was a slow week in the economic world. Thursday weekly jobless claims fell to 310,000 in the week ended Nov. 8, roughly in line with analyst’s forecasts of 309,000, and down from 316,000 the week before. The four week moving average for claims rose to 309,250 from 308,500 the week prior. For the past 10 weeks, initial claims have averaged 308,300 a week, and have swung as low as 299,000 and as high as 316,000.

Also out was productivity & costs and the ecru inflation gauge. Productivity outside the farm sector accelerated to a 4.5% annual rate of increase between July and September, the biggest rise since the fourth quarter of 1992, after a 2.4% rise in the second quarter. The increase, which exceeded expectations, helps to fortify long term economic growth by easing inflationary pressure, despite the widespread tightness of labor markets, economists said. Productivity, which gauges business efficiency by measuring workers' hourly output of goods and services, is a key factor in determining inflation. For the economy as a whole, this is another strong piece of evidence that we are in a new economic environment in which technological change and global competition allow us to grow faster without inflation. Friday was a busy day. Inflation at the wholesale level nearly disappeared in October, helped by falling gasoline and meat costs. Prices paid for finished goods to producers, such as food processing plants and auto factories, inched just +0.1% higher. The core rate, which excludes food and energy, were unchanged. The PPI index has declined at a 1.2 percent annual rate for the first 10 months of the year. Inflation has remained low, despite robust growth and the lowest unemployment in 24 years. Analysts are predicting the financial turmoil in Southeast Asia will help to contain the prices of some commodities and goods next year. Retail sales fell -0.2% percent in October.        The decline in retail sales in October was the second straight decline as falling auto sales offset an increase in clothing purchases spurred by cooler temperatures. Many analysts had expected a +0.3% gain. Retail sales account for about 1/3rd of the nation’s economic activity, and the recent sluggishness has caused some concern over how robust the holiday shopping season will be. The Christmas season often accounts for half of a retailer’s earnings. The second preliminary number on consumer sentiment came out a little higher than expected at 106.1. The number has been above 100 for so many years now that it appears to be normal.

Next Week’s Economic Data

Monday gives us Industrial production. This number is an important number to start the week off with. The way the market has been of late it will be good if the number isn’t too strong thus showing strength in the economy. Tuesday has the consumer price index come out. This number will either confirm inflation or put out more questions as to its return. Business inventories will be out. This indicator can give us a great perspective on whether the economy is continuing to expand or retract. The key is to watch for a buildup or lack there of. The problem is that with the economy becoming so efficient, we’re beginning to need less of an inventory buildup. Wednesday has housing starts. The number has had little effect lately on the market so unless the number is way out of whack nothing will be affected. Also out are weekly chain store sales reports. Thursday has weekly jobless claims and the Philadelphia federal reserve survey. There isn’t anything out on Friday. The start of the week has some pretty heavy indicators for the market to contend with but as the week goes on it gives it alot of time to settle down if there are any surprises.

Technically

The market is actually giving us a neutral reading even though the market went no where this week. The relative strength indicator took a big jump up on Thursday giving us a good indication that the market may be putting in a base here. Stochastics are once again heading towards overbought territory but have a bit to go yet. Our best indicator this entire year has been the ARMS index reading and it is still showing the market is quite oversold. AC Moore has given us a reading on the market in accordance with the arms index. When we had the big selloff last month there was extremely strong down volume the first day and then strong volume on the upside. The Arms index gave a great reading which in the past has always indicated a stronger market in the next 2 months. When the reading first came out it made us skeptical but as the other indicators helped to confirm it and the market did rise, it makes you want to pay more attention to it.

Mclellan Oscillator: -64 -100 oversold +100 overbought

Summation Index: 1013

Five day arms: 1.02 .80 and below, overbought 1.00 and above, oversold

Ten day arms: .98 .80 and below, overbought 1.00 and above, oversold

Bulls: 42.7 previous week 44.3 50% plus overbought/bearish

Bears: 38.7 previous week 34.7 50% plus oversold /bullish

Correction: 18.6 previous week 21.0

Five day Qvix: 35.96 10-15 bullish, low volatility 15-40 bearish, high volatility

Davidson’s View

The past couple of months have shown us how momentum players have such a strong influence in pushing the market around. When they leave, the market goes nowhere. Everything was so easy the past two and three quarter years. Buy and hold; that was it. Everyone did well! At the start of the year I gave my prediction for what the market could do this year and I thought it would be a good idea to reread what I said then.

"The market has been following history correctly the past few years. The main reason we felt the market would be up last year and the year before was because of the presidential election this year (96). History showed that the market usually does well on the year preceding elections and the year of the election. On average, the year following an election the market experiences a drop of about 15%. Also there have only been 6 times when the market has gone up over 20% for two consecutive years. Every time this has happened the market has fallen, on average, 40% the following year. We believe the market will have a good correction this year, at least in the 20% range. We also believe that the market could rise at least 10% this year. It will probably go up 10% before it falls 20%, but who knows. It always seems that the market runs up strongly before a good correction can occur."

Well, this year has now seen two big rises in the market and two big corrections. We were first up about 10% and then corrected back to the start of the year. Then we rallied up over 20% and are still in the middle of this 10% correction. In the old days a 10% correction would always mean the resumption of the bull market but it would be some time before the market would begin to move again. The 90’s have changed that a bit. Now when the market hits the -10% mark it just turns around and goes up. Many analysts will even brag that a market was down 10% intraday for 1 hour so that’s enough. So far that has been the case with momentum players carrying the market this year! One thing I have noticed is that rallies are climbing higher faster and corrections are getting swifter. I do believe that the harder and further these corrections get, the longer we’ll remain down once again. The Dow made a new high way back on August 6th, 8259.31. We’re still a long way away from that level. The market has always been a great indicator of things to come and it appears that it saw the Asian turmoil coming! Fundamentally, everything is still great in our market and normally a market will work off of its own fundamentals as long as nothing else crops up. But the more we become a global community and allow the momentum players to push the world indexes around, we may not see a new high in the Dow for quite some time. And now we have to deal with Iraq too. The markets are saying that nothing is going to happen. Even with President Clinton’s announcement that he is going to move two aircraft carriers into the Persian gulf, oil only rose about .30 cents. We don’t expect the market to move much higher from here and we don’t expect it to go much lower. Of course, being a spread trader, thats the best news we can hope to hear!!

MARKET CLOSES

Current Trades

Well the market was little changed for the week but the premiums on our trades collapsed! A credit spread traders dream!! We have five days left to expiration and it looks like were going to have another 40% plus month! We have no worries for the market reaching the 1005 index level next week. The market would have to rally over 8% to even get to that level. Our program has placed the odds of reaching that level at 3% so there is little chance we’ll see it. Our sold 900 long puts had a premium of over $19.00 mid week as the market collapsed to a low of 899! With the strong rally back on Thursday and Friday the S & P came back to where we started the week!) We put the numbers through the program and it gave us a 89% reliability that the market will not reach the 900 level by expiration! 40% profit here we come!!

Copyright c 1996. All rights reserved. The information contained in the AGORA OUTLOOK NEWSLETTER is based upon data that is believed to be accurate, but is not guaranteed, and subject to change without notice. All projections, forecasts, opinions, and track records cannot be guaranteed to equal our past performance. Persons reading this newsletter are responsible for their actions. Officers and employees of this publication may at times have a position in the securities mentioned, or related services.

Agora Outlook

November Expiration November 21st 1997

Percentage wise, we’re now well past the high of 1987 when you look at the rally since 1990. Interestingly, even if we do include the 1994 correction, we’re now even (in percentage terms) with the `87 high. Twice this year, the overall market has had a 10% "correction". After making a new record high in February, the market corrected intra month about 7%. Since the market’s new high in August, the market has mostly gone sideways. It corrected about 10% just after the October expiration period but immediately came off its lows with a sharp 6% rally. As you know, we believe that a genuine correction in the market lasts longer than a few days or hours. Also, the market needs to consolidate the decline as in 1987 and 1990. We believe that a good correction will endure through an expiration period and be at least 10% lower at expiration. We have not seen such a correction since 1990. It has always been our view that with the multiple of derivative strategies being employed it is not to the benefit of institutions for an expiration period to be too low or too high since institutions are now big sellers of options. They prefer to keep 88% of all options expiring worthless since its a great cash grab for them. This past expiration period is a great example of that. Even though we saw a huge decline in the market this past November expiration, we still finished higher than the October expiration. The S & P 500 October expiration number was 947.83. This month’s was 962.54, up +14.71 points.

Economic Effects

On Monday industrial production came out strong with a swelling volume of new computers and other consumer goods for October as industries ran at their fastest pace in more than 2-1/2 years. Total output by the nation's mines, factories and utilities rose 0.5% last month after revised increases of 0.5% in September and 0.6% in August. The capacity use rate, which measures how close businesses are to their maximum operating capacity or capacity utilization, climbed to 84.3% last month from 84.2% the month previous, the steepest since an 84.3% reading in March 1995. According to analysts the figures showed robust industrial activity, though its durability depends upon consumer spending and that has shown some signs of slowing. Despite the high capacity use rate nearing the 85% mark often associated with production bottlenecks and inflation, analysts noted some key sectors such as auto making and chemicals, were below past cyclical peaks. Tuesday had Btm Schroeder weekly chain store sales coming in up +.03% and Johnson Redbook sales down -1.7%. The bond market loved the Redbook number when it came out already showing consumer spending low even though the Christmas shopping season has begun. The Consumer Price Index was released showing an annual rate of just 1.8%, compared to a 3.3% increase during 1996. That report followed last week’s announcement that wholesale prices had edged up just 0.1% in October, suggesting little price pressures in the pipeline. Excluding the volatile food and energy prices, the so called core CPI was up just 0.2%. That translated into a 2.2% annual rate of increase during the first 10 months, slower than the 2.6% gain in 1996. Very good news for the market. Along with that, business inventories climbed sharply in September. This due to a bulge in unsold goods on retailer’s shelves. Nonetheless, the inventory-to-sales ratio that measures how long it would take to deplete stocks at the current sales pace eased to 1.36 month’s worth in September from 1.37 in August. Wednesday showed that housing starts rose 1.4% percent to a 1.528 million annual rate in October, the strongest since a 1.554 million pace in February after a revised 8% jump. The October increase came on a 20.6% jump in starts of apartment buildings, after a 5.3% rise in September. Starts of single family homes fell 3.8% last month after an 8.8% September increase. The markets showed little reaction to the report. The Dow sold off a little, -23 points and the yield on 30 year bond fell to 6.05%. On Thursday, unemployment benefits rose by +20,000, exceeding economists' forecasts. First time claims for jobless benefits rose to 333,000 from 313,000 the prior week. The four week moving average, considered a more reliable indicator of the job market's health, rose to 315,250, up from 310,000 the previous week. With the unemployment rate currently so low, this was good news for bonds and stocks, assisting in their rally. The 30 year bond touched the 6.01% level. The Federal Reserve Bank of Philadelphia manufacturing sector fell to 10.1 in November from 11.5 in October. The trade deficit shot up in September to its highest level in eight months as trade with troubled Asian economies showed early signs of sharp deterioration. The total deficit on trade in goods and services soared unexpectedly by 17% to $11.07 billion in September the highest since an $11.61 billion shortfall last January and well above Wall Street economists' forecasts for a $9.9-billion gap. The shortfall with China swelled 6.9% to a record $5.52 billion in September, once more the highest deficit with any country. This was due in part to large volumes of toy imports in preparation for the Christmas shopping season. The monthly gap with Japan accelerated 13.4 percent to $5.13 billion. Asian financial market turmoil and currency devaluation’s are expected to depress U.S. exports at a time when Asia is trying to increase exports to the U.S markets. A competitive depreciation of Japan's yen could balloon the U.S. imbalance on trade in coming months. There was nothing out on Friday. The market began to pay attention to indicators this week as things settled down in Asia and Iraq. Most indicators were positive for the market.

Next week’s Economic data

On Tuesday we get weekly chain store sales reports along with consumer confidence and existing home sales. These numbers could have some effect on the market as we’re now moving into the Christmas buying time so we’ll really get to see how people are feeling. If the numbers are too strong, we could see a negative market reaction. Wednesday has the 2nd preliminary 3rd quarter gross domestic product. This number isn’t taken seriously until the final revision comes out next month. Jobless claims come out today since Thursday is a holiday. Durable goods and consumer sentiment are the important numbers of the day. If durable goods is strong again, along with consumer sentiment, we could see a bad market reaction. Friday has personal income. This number is the most important number of the week. If it is strong, inflation fears will arise once again.

Technically

With the big move we had this week the market has become overbought again. Even though we have moved up, relative strength seems to be dissipating. The indexes may be in a fight for higher ground! Stochastics are also overbought. But the volatility index gave up some ground this week so we may see a higher market in weeks to come. That would make sense since we are moving into a strong seasonal time for the market. The incredibly accurate arms index (this year) is also registering an overbought condition once again in the 5 day arms. The 10 day is’nt far behind. The way the market has set itself up, it just may make an attempt to reach a new high. Don’t follow the Dow, though, as the broader market is diverging and leaving it behind. The only big thing that happened this week was that the market broke out of its downward channel which means it is bullish for a higher move. This could be why we’ll see an attempt at higher averages. We also saw a new all time high in the Dow Jones Utility average. The last time that index hit a new high was in the fall of 1993, a month before the 30 year bond hit 5.75%. After the Fed began raising interest rates that spring, both the utility average and the bond corrected strongly.

Mclellan Oscillator: +68 -100 oversold +100 overbought

Summation Index: 1162

Five day arms: .71 .80 and below, overbought 1.00 and above, oversold

Ten day arms: .87 .80 and below, overbought 1.00 and above, oversold

Bulls: 45.1 previous week 42.7 50% plus overbought/bearish

Bears: 37.7 previous week 38.7 50% plus oversold /bullish

Correction: 17.2 previous week 18.6

Five day Qvix: 29.36 10-15 bullish, low volatility 15-40 bearish, high volatility

Davidson’s View

This section will be filled Sunday evening!!

MARKET CLOSES

S & P 100 Expiration 926.98

S & P 500 Expiration 962.54

Current Trades

Well is there more to say! For the third month running we have made succesfull two sided trades producing an average 40% plus profit per month. We don’t expect anything different for December. We will be sending out the "ALERT" Sunday evening about the coming months trades.

Program Trades

Copyright c 1996. All rights reserved. The information contained in the AGORA OUTLOOK NEWSLETTER is based upon data that is believed to be accurate, but is not guaranteed, and subject to change without notice. All projections, forecasts, opinions, and track records cannot be guaranteed to equal our past performance. Persons reading this newsletter are responsible for their actions. Officers and employees of this publication may at times have a position in the securities mentioned, or related services.