Watch This Bellwether Stock
by David Fuller, Fuller Money
Microsoft
(MSFT) is the current standard-bearer
for stock markets. During bull markets it is usually possible to identify
a dominant sector which is often led by one key stock. In the U.S. bull
trend of the 1990s that sector has been technology and Microsoft is unquestionably
the bellwether stock, not only on Wall Street but also for global stock
markets where prices have risen in recent years. For a major company its
share price rise of 925% in the last 5 years is staggering. With a market
capitalization of US$500 billion at its July intra-day high of $US100.75,
Microsoft's stock market value is far greater than that of any other company.
Its founder Bill Gates is the world's richest man. In recent years, Microsoft
has attracted more admiration, envy and hostility than any other company
in modern history. Its near monopoly of word processing, spreadsheet and
database software is under increasing assault from Sun Microsystems and
other technology firms, while it is embroiled in an anti-trust lawsuit filed
by the U.S. government.
Nevertheless,
Microsoft's share price retested its all-time high recently. However, the
chart action has become more choppy this year, in line with the overall
market. The main consistency characteristics are higher highs during the
rallies and higher reaction lows following the sharp corrections, of which
there have been three in 1999 to date. When Microsoft breaks this progression
of rising floors, with the latest established in early August near $US82
(closing basis) and unable to bounce back quickly as we have seen following
its other sharp corrections, the volatile action will look more like a top
formation than a continuation pattern. If that happens, the U.S.'s record
breaking bull market will probably be history. Meanwhile, the failure to
maintain a break up out of the small late-August/early September range between
US$92 and US$96 is a warning.
Editor's
Note: David Fuller is editor of
FullerMoney - The Global Strategy Letter, 7 Swallow St., London W1R
7HD, England, 1 year, 12 issues, US$480/£300. FullerMoney examines
world stock markets, currencies, commodities, interest rates and bonds.
This international investment letter provides a global overview, with specific
focus on the current areas of greatest interest and opportunity. Every issue
contains a feature on where to invest or trade. Visit the Web site at www.fullermarkets.com.
