Excerpted from the transcript at the Nightly Business Report site: http://www.nightlybusiness.org

08-20-99: “Market Monitor”- Robert Morrow, Editor, Institutional Advisory Service

JEFF YASTINE: Our market monitor guest this week is Robert Morrow of the Robert Morrow Institutional Advisory Service, headquartered in Bradenton, Florida. He also publishes the “High-Tech Growth Forecaster,” a monthly market letter and Bob, welcome back to the show.


YASTINE: You were last on the show that was in January with Paul and at the time, you made a great forecast here. You said the Dow would hit 11,244 in the third quarter and of course the Dow did peak July 16th at 11209. So a great call.

MORROW: Thank you very much.

YASTINE: Where do we go from here? You said at the time with Paul that there would be a correction. We have had something of a selloff. Are we through with that yet or is there still more to go?

MORROW: No, I don’t think so. In the general market, the S&P 500 and in the Dow, I was expecting a 13 percent correction. I think that we haven’t fulfilled that yet on either index. We’ve got further to go. I think that bottom will probably occur in October, and I think then that correction from the minor peak will be completed.

YASTINE: So the rally we’ve seen in the last week or so is something that should be short-lived?

MORROW: I think so. Just a relief rally.

YASTINE: All right. What happens with the NASDAQ?

MORROW: Well, the NASDAQ could go down to the 2,100, 2,200 area. My forecast had a range of about 20 to 26 percent off the peak. And that hasn’t been fulfilled yet. We’ve only been down 13 percent.

YASTINE: Let’s get to some questions from our viewers. We have the first one tonight from John Dahlberg. He watches us on KQED in San Francisco and he wants to know, should I invest in natural gas companies? Your outlook for the natural gas sector.

MORROW: Well, on a purely technical view, I’ve looked at the index for natural gas and actually I have a short-term sell on that index. I looked at about 22 different companies in that industry and only 45 percent of them were strong on my early warning technical model. So I think that you could see weakness over the next quarter in the natural gas area.

YASTINE: All right. Our next question comes from Dallas, Texas from Ezra Tita who watches us on KERA and he asks, what is your outlook for the semiconductor equipment sector for the year 2000? At least this week, that sector’s been somewhat beaten up. Applied Materials was warning about a plateauing of orders here in the next couple of quarters.

MORROW: Right. The capital equipment industry leads semiconductors so they peaked earlier. So they peaked earlier. I looked at 10 companies and only about 30 percent of those are strong. I’d stay away from that area, at least for the next quarter and re-look at it then.

YASTINE: All right. Now, what kind of recommendations do you have for us? Let’s start with the ones that would be from your high-tech growth forecaster.

MORROW: In the high-tech growth forecaster, Gateway2000 would be a selection, (GTW), Intel (INTC), Scientific Atlanta (SFA) would be a third selection.

YASTINE: And these are all, again, based on stocks that look good from sort of the wave analysis that you do?

MORROW: Right, they’re exhibiting strength now and I think they will for the next quarter.

YASTINE: And also, you have a new service, that is a new model that’s called the index managers. And these are basically stocks that, again, according to your wave analysis, have bottomed and look ready to move higher.

MORROW: Right.

YASTINE: Sort of a value technical standpoint.

MORROW: Exactly. They’ve finished their consolidation phase. In that I would look at Safeway (SWY), Viacom (VIA.B), Microsoft (MSFT), Electronic Data Systems (EDS), Lucent (LU), and finally PepsiCo, (PEP).

YASTINE: And like with Microsoft, that’s something that you don’t think, even if we get a further correction from here into October, shouldn’t move any lower than it is now?

MORROW: No. I think it’s finished its consolidation phase, and of course it’s a wonderful Internet play.

YASTINE: I also wanted to ask you your outlook, sort of your longer term outlook from here. You see us correcting into October, your Dow target’s about 9700?


YASTINE: And the S&P is 1240?

MORROW: 1240.

YASTINE: Where do we go from there?

MORROW: We’re reentering the bull market after the minor peak and I think we’re going to go to 14777 on the Dow out in the third quarter of 2001, about two years away. My figure for the S&P 500 would be 1876.

YASTINE: And very quickly, is this a steady climb after the correction, or do you see a few more corrections?

MORROW: No. It’ll be a rocky road. There will probably be two more significant corrections.

YASTINE: All right, Bob, I thank you for joining us today.

MORROW: Thank you.

YASTINE: Our guest, Robert S. Morrow of the Robert Morrow Institutional Advisory Service.