The Week ahead

The Comeback Market

The largest percentage gain in a long while has brought the NASDAQ back from the brink of collapse. The forces of economic strength and potential profits have battled back against the dark evil forces of Enronitis. Who will win, nobody knows, but the prospects for the good guys have improved.

After the close of Friday's market, Oracle Corporation admitted that earnings estimates for the current and next quarter are ridiculous. This is a sign that corporate software spending has not picked up enough to save Oracle.

Still, the amount of good news on the earnings front seems to exceed the amount of bad news. How the market reacts to the Oracle news is important.

To show us who is going to win will be obvious by next week. If another up week follows the late week rally, then Enronitis is receding as a threat. If the rally fizzles due to new fears, then the battle will go on.

The prudent investor, long term or short will watch the economic data. Many recessions (there is some doubt now if we really had one) involve a second dip. Inventories are so low right now that just to meet normal consumption the economy could get revved up again.

Another factor needed for a fundamental market change (a new bull market) is corporate spending. Oracle Corporation has proven that this has not yet happened, at least not in a broad way. Still waiting for news on that one.

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Shmuel Protter
investmenttool.com