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DeGraaf Monthly


Thx Jeff!


The following represents some highlights from Lehman Brothers Chief Technical Analyst Jeff Degraaf's monthly conference call...

  • Momentum is the strongest it's been since March '03 rally along with impressive breadth (comment on the internal strength and depth to this market) provide the biggest source of fuel for the upside fire (SPX 1263 upside count)

  • We are entering the "sweet-spot" with regard to seasonality as Nov - Jan provides best historic monthly returns for equity investors

  • 3 out of 5 of trend following systems are now positive

  • Financials are looking more impressive and seem to be on the verge of breaking out

  • A look at the II figures delineates the pervasiveness of the bulls (57%) - a factor that could temper the upside between now and year end. Sentiment is often the key tell as far as the sustainability of a breakout. Sentiment preceding the breakout from the '94 trading range, for example, was much more bearish thereby providing the needed thrust in '95.

  • The trade weighted dollar is breaking down and oversold but consensus figures show only 18% bulls based on his work implying little impetus to press the downside bet from current levels given the possibility of a countertrend move (would be confirmed thru 91 on the trade weighted dollar). DeGraaf is certainly not a dollar bull but is merely discussing the probability for some type of mean-reverting counter-trend move.

  • Too many bulls in crude (and gold) - a pullback to $40 would still maintain the secular uptrend in oil

  • Metals - 200 day legitimate support in short run; Long term secular uptrend from a technical perspective implies buying on weakness.

  • Bonds - most risk is in the front end looking for a nine-month move that could carry 2 year yields toward 3.75% (4.50% 10 yr)

  • Retail has followed historical strength into Nov 29th - then a time to reduce exposure into Christmas (not meant as advice but something to be aware of if you're involved in the space)

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No positions in stocks mentioned.

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