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The vibrating market says sell

June 25, 1997

NEW YORK (AP) - Robert Morrow is confident of his forecast: The stock market, as measured by the Standard & Poor’s 500-stock index, will decline 24 percent over the next 12 months.

While Morrow hasn’t applied the same analytical effort to the Nasdaq Stock Market, he is advising his high-priced institutional clients to expect a decline of about 36 percent.

Such percentages would lower the S&P to about 680 from its highs of around 900, and the more volatile Nasdaq composite index to 930 from a high of about 1,450. Applied to the Dow Jones average, a 24 percent drop would be to around 5,900 from the 7,800 levels it’s seen recently.

Morrow is one of the very few who could be called a fearless forecaster, often _ as now _ releasing his views against the prevailing opinion. In this instance, amid extreme bullishness.

In doing so, it is not his intention to stand out from the crowd. An authority on vibration analysis with 37 international patents to his credit, he merely interprets the market’s vibes.

He can be uncannily accurate. In ``Barron’s″ July 16, 1990 issue he predicted the Dow Jones industrials would bottom out in the fourth quarter at 2,366. The bottom was reached Oct. 11 at 2,365.

In March 1987, he forecast a peak of 2,727 in the Dow Jones industrial average to occur in August. He missed by five points. The peak was 2,722, and of course was followed by a market collapse.

In February 1996, he publicly forecast a bull market - well over 100 S&P points _ to begin in May and last until May 1997. The gain exceeded his expectations; the timing, he says, is correct.

In other words, he says, the market selloff could begin any day and continue at the rate of 2 percent a month until next June, with three bear-market rallies, or rather brief periods of relief.

Morrow has been an electrical engineer most of his adult years, concerned with instrumentation to detect, measure and study vibrations emitted by such things as turbines and airplane wings.

Physical structures produce signature vibrations, distinctly theirs, variations of which can be meaningful to someone trained in Fourier analysis, in which complex wave structures are measured.

Studying the stock market’s patterns back through the decades of the 20th century, Morrow found similar signatures, related them to ensuing activity, and concluded that the market was predictable.

While he has not yet reached a scientific explanation for the patterns, he suspects that a major reason lies in the existence of weekly, bi-weekly, monthly, quarterly and annual money flows.

For now, he is too busy running Robert S. Morrow Institutional Advisory Service, Bradenton, Fla., to complete his study of ``why,″ except to say ``there is a deterministic pattern clear as a bell.″

He observes that this pattern has substantially changed since World War II, and that it may be under modification now by the growth of mutual funds and the intensity of retirement saving.

The impact of fund growth and retirement saving are still too new for Morrow to measure precisely how they might be changing long-term patterns. For now, it’s in his futures file.

Meanwhile, asked how some of his institutional clients view the market, he termed them ``uniformly nervous.″ Many, he said, are seeking sectors that might do well in a general bear market.

Among their problems, he believes, is they are forced to buy in spite of doubts. ``Clients won’t let them cash in; they won’t tolerate it,″ he said. Sentiment is just too bullish, he believes.

But Morrow himself is a long-term bull. After the ``rather horrendous correction″ over the next year, he foresees another bull market emerging.

His data is meant for shorter-term forecasts, but he admits to having a speculative calculation for the market three to four years hence: S&P 1,300, Dow Jones 11,274.

End Adv AMs Friday, June 27

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