Market signs finally better, but don’t get too excited

The stock market is down about 60 percent from the all-time high set in October 2007 and this bear market has lasted 17 months.
I have stayed completely negative on the market since August 2007, when I wrote: "The seeds of the next bear market have
been
sown."

Finally, though, I can change my tune. A little. At last, I am seeing some different signs. These signals tend to appear very
early in a market turnaround, but at least it’s something.

First, a few predictions. I don’t think the market will fall another 60 percent before the next bull market begins. And I
don’t think this bear can last another 17 months, because if it did, it would have a longer life than the greatest bear market
in our history.

At this point, the market doesn’t seem to have a lot of positives, but there are a few things that maybe, just maybe, could
provide a reed to grab onto.

Investors should keep in mind that even if we are in the seventh inning of this bear market, the last stretch can still prove
fatal to those unwilling to exercise the necessary caution. Companies you once thought were of the highest quality can still
go bust. Panic, which has so far eluded this market, may still set in, causing a few terrifyingly bad days.

OK, so there’s your pound of salt.

The stock market is a precursor to the business cycle. People make investments in areas of anticipated growth before removing
those investments in expectation of slower times. Over the last 40 years, semiconductor stocks have served as wonderful early
indicators of an improvement of general business activity. I believe this tool is more powerful than it ever has been due
to the large presence of computer chips in our modern economy.

Since the November market bottom, almost every major stock index and sector has gone on to post new lows, except for semiconductor
stocks. Intel Corp., which is the largest of the group, has managed to stay slightly above the $12 level it hit last Nov.
20.

Two other major components in the index, Texas Instruments Inc. and Applied Materials Inc., are also holding their ground.
None of these stocks are breaking out yet, but constructive bases are important to see right now.

The relative strength showing in the semiconductor stocks has spread, slightly, to other technology areas. This is also important
due to the explosive nature of tech stocks. After this many months of brutal selling, there may be nothing better than a good
old-fashioned tech rally to spark stocks on a global basis.

Compared to the large number of stocks that make up the index, the recent slightly positive action in NASDAQ has been selective.
Selectivity is not what new bull markets are made of, so the buying absolutely has to spread before I would expect this bear
market to end.

Despite a few reasons to look for a change, defense is still the primary objective. These early signs may be nothing more
than temporary holding pots because most investors are still completely freaked out about anything financial.

The biotech sector looked decent until recently, then got hammered after some bad news out of Washington, D.C. Land mines
abound, but perhaps the clearing team has had a little success on the front lines.

___



Hauke is the CEO of Samex Capital Advisors, a locally based money manager. Views expressed here are the writer’s. Hauke can
be reached at 203-3365 or at keenan@samexcapital.com.