Prudential's Acampora sees bull market running for two more years; 'Rising rates should not end our bull market;' Picks 12 stocks 'Poised For a Major Breakout'

Business Wire, March 25, 1996

NEW YORK--(BUSINESS WIRE)--March 25, 1996--According to Ralph Acampora, Prudential Securities' Director of Technical Analysis, "We are in one of the greatest bull markets in history.

This bull market is alive and well and has another two years to run."

In the first update to his June 1995 "Dow 7000" report, which clients begin receiving today, Acampora reiterated his projection that the Dow Jones Industrial Average could climb to 7000 by the first quarter of 1998; to 6000 by year-end 1996. "Rising rates should not end our bull market," he said.

In fact, Acampora said he expects the Dow to "de-link" from the bond market.

Saying that he believed "it is the 1962 to 1966 period revisited," Acampora said the recent decline in bonds and rise in interest rates are reminiscent of what happened in April/July 1963. At that time, Acampora stated, A-rated Corporate Bond yields troughed about one and a half years before the DJIA finally peaked out.

He added: "Interest rates rose for about 12 months, and then backed down somewhat in the second half of 1964, first quarter of 1965." During that period, the DJIA rose steadily until it peaked in February, 1966, gaining another 45%.

Acampora stated that if, indeed, we are reliving the 1960s bull market, then "the initial rise in rates today might not spell the end for equities. Rates would have to rise and maintain new levels at least one year before equities would finally peak out. This means we have at least one more year of solid rising stock prices." He added: "We believe that any pause would be a welcome buying opportunity."

Rotation, Not Liquidation

"In our opinion, a buy/hold philosophy must be adopted immediately," Acampora said. "Stock selection is key -- and sector rotation, not liquidation, should dominate.

"The distraction caused by rapid sector rotation is one of the main reasons why so many people are unhappy with this bull market," he said, citing how technology stocks and paper issues quickly fell out of favor in July of 1995 and stayed that way for the remainder of the year.

"This reversal caught many investors by surprise and has unfortunately left a disturbing legacy," he said. "Now most investors are not willing to buy at current levels. They insist on waiting for the market `to correct.' What they fail to appreciate is that while they are waiting, many sectors are correcting."

Was That A Correction?

"Since we first called for Dow at 7000, we have experienced six market corrections," Acampora said. "This might sound odd since so many people are complaining that we have not yet seen a correction. We disagree."

Based on his analysis of corrections and subsequent rallies, Acampora believes that the current bull market is more powerful than the bull market that ran between 1962 to 1966 when the DJIA gained 85% and the S&P gained 70%.

"Over the past nine months the stock market has dropped an average 4.7% in each of its six corrections," he explained. "The average duration of these corrections has been nine trading days. The 1962-1966 bull market witnessed eight corrections averaging a decline of 5.5% over an average of four weeks. Today's corrections have been shallower, faster, and the subsequent rallies have been quicker and more profitable than those in the 1960s."

12 Stocks Poised For Major Breakout

Acampora listed 12 stocks that he believes are "poised for a major breakout" over the remainder of this bull market: Dayton Hudson (DH), Hillenbrand Industries (HB), Home Depot (HD), Illinois Central (IC), Kansas City Southern (KSU), Manpower (MAN), Placer Dome (PDG), Russ Berrie & Co. (RUS), Sothebys Holdings (BID), Sunbeam Corp. (SOC), Toys "R" Us (TOY), and Union Texas Petroleum (UTH).

Prudential Securities Incorporated is a fully diversified, global securities firm based in New York City, serving clients in the U.S. and overseas through approximately 6,000 Financial Advisors. The fifth largest brokerage firm, Prudential Securities is a subsidiary of The Prudential Insurance Company of America.

CONTACT: Prudential Securities, New York

Susan Atran, 212/214-3846