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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: Boca_PETE who wrote (6358)6/29/1999 3:09:00 PM
From: marc ultra  Read Replies (1) of 15132
 
Pete re<<<<<<<When you see the "inflection point", what "things" will you be seeing to know this is the real "inflection point" - a new closing high on high volume followed by a sharp reversal on even higher volume ? ? Other "things (please describe specifically if possible - I'd like to learn).>>>>>>

I'm not looking at this in terms of a technical pattern that may occur as you mention but rather in terms of a set up that may likely turn Bob's model bearish as we reach new highs. Forgetting about Bob's possible call for the moment a further rise now to new highs with long rates anywhere within spitting distance of 6% will represent extreme valuation and as Justa and I noted extreme bullish sentiment is evident in the Put/Call ratio and Investors Intelligence bullish sentiment is in the upper 60's and could easily push into that 70% area with a sustained move to new highs. We have however had strong bullish sentiment and high valuation many times in the bull market so what makes this time different? The big difference is the Fed is now squelching down severely on the growth of the money supply, something not present in other recent times of high valuation and bullish sentiment. This is at the point now where we will get at least some rise in short term rates and maybe more. I think clearly most would agree the flood of liquidity introduced by the Fed had a lot to do with the huge rise in stock prices and we are now looking at the opposite side of the see-saw where the liquidity is in the process of being sucked out. So going with Bob's notion that the market will reach new highs at which point he will re-evaluate to see if more progress can be made or if instead we will fall into a bear market, unless the economy suddenly and dramatically slows or the world stops stabilizing and improving but instead collapses again it seems to me once we reach new highs the factors are likely to be in place for a bear market and when I say inflection point I am simply talking about this change from a bull to a bear market and not a specific technical pattern. It also appears that the acute shortage of skilled labor is going to be exacerbating this situation but no need to go into that now.

Marc
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