wall st. waiting for a bigger fool.

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    Waiting for that pause

    Wall Streeters are calling for a pullback in the week ahead. Been there before?
    October 19, 2003: 12:23 AM EDT
    By Justin Lahart, CNN/Money Senior Writer



    NEW YORK (CNN/Money) - One common characteristic of market rallies that keep on running is that they are chock full of people saying a little pullback is in order.

    Then there the times when the market is about to fall dangerously. What you usually see then is a lot of people saying that stocks need to pull back, but not so much that it's a reason to abandon them.

    And sometimes when people call for a little pullback, as of course they are now, stocks have a little pullback and then head higher. Go figure.

    Now that we've slapped enough warning labels around the joint, we can start talking about the week ahead. (And if you want details on the week's key events, you should click here.)

    So, given the way companies have been beating third-quarter earnings estimates like they were Gerry Cooney's face, what's all this about the market stalling? The sense on Wall Street seems to be that great as the results are, investors pretty much expected them and loaded up ahead of time, which is why stocks have made little progress since earnings season kicked off.

    "This is a market where too many people have already bought," said Midwest Research equity market strategist Tony Dwyer. "Everybody is already in, so who's going to be the next buyer?"

    It's a situation where there isn't any catalyst to pull traders into the market, said Dwyer. Lacking that buying pressure, selling takes the fore and stocks head down. But this isn't a long-term situation, according to Dwyer, because while traders don't have much of a reason to buy the market, the backdrop of an improving economy means that there are long-term investors who are going to be happy to buy at somewhat lower prices.

    Wall Street pastoral
    Miller Tabak chief technical analyst Philip Roth, less of a bull than Dwyer, thinks that the selling could go deeper, with the Dow and the S&P shedding 10 to 15 percent and the Nasdaq, because it is the Nasdaq, falling by more.


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    "We're in the mature phase of this advance," said Roth. "Peak momentum was a long time ago. We had a strong move in April and May. Since June it's just zig-zagged up."

    But by December Roth reckons that stocks will be on their way up again, and will push toward new highs in early 2004.

    "Should you protect profits? Yes," said Roth. "But run for the hills? No."

    Although there are plenty of earnings reports coming out in the week ahead (click here for the important ones) the news on the economic front is going to be scant.

    Maybe the only thing of note is the Conference Board's Leading Indicators reading for September, due out Monday. It's not considered a very important report -- almost all of its components have already come out -- but it's handy to get a sense of whether the economy has been accelerating or decelerating.

    Slowing a tad is what it looks like. Although stocks rose and the job picture improved somewhat, other components, like consumer sentiment and new orders, fell.

    "It's very clear that September was a month of continued vigor for the economy," said Morgan Stanley economist Bill Sullivan. "But consumption wasn't as vibrant as in July and August."

    That's not a surprise, given that the effects of this summer's child tax credit and mortgage refinancing boom are waning. Sullivan thinks the economy will continue to moderate its pace from the third quarter, when it was moving along at a remarkable clip. The real question is what the economy is going to look like at the end of that deceleration phase. Nobody really knows the answer to that one yet.

    Key events in the week ahead

    It's earnings all week long. Here are the reports to watch.


    The Conference Board releases its index of Leading Indicators on Monday. Economists polled think it fell by 0.1 percent in September after rising by 0.4 percent in August.


    The Treasury budget for September comes out Monday. It will give people another opportunity to complain about the surging U.S. budget deficit.


    Initial jobless claims are due out Thursday. Traders will be watching to see if they continue to trend down. Last Thursday they clocked in at 384,000.


 
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