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Strategies & Market Trends : The Art of Investing
PICK 44.90+0.7%Nov 21 4:00 PM EST
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To: Lee Lichterman III who wrote (790)9/25/1999 11:18:00 AM
From: jttmab   of 10607
 
Lee,

I've watched the A/D lines and wouldn't argue your concern over the divergence. The A/D lines have their weaknesses in predictive quality as they don't measure the magnitudes of the advance and decline. One could speculate the, let's say, absolute divergence by some notional projection; that would be dangerous without the data to support it...or at least I'm not willing to stick my neck out on that one <g>.

But let me make at least a notional argument that the A/D divergence may not be "as bad" as it seems. The equities market may be fragmenting into two groups. Industrial based equities vs. communications/information equities. The former heavily populating the lower line while the later heavily populating the advance line. This doesn't imply that the magnitude of the divergence is "just", but that it may be normal to have some growing divergence over the long run...5+ years. I might add that I think that overall global GDP growth is fueled out of, directly or indirectly, the explosion in communications/information technologies and that growth has just started in the last few years.

I agree on the assessment of the FOMC meeting and you could throw in the meeting of the G7 to a lesser degree...give us back to back negative results on each of those and a 21% correction may not look unreasonable. Which maybe means that scenario is unlikely. In any event, I will not make any bets in advance, too unpredictabe.

Scalping the bounce: I'm inclined to just sit tight and skip any scalp; the gain would likely be small and the sector rotation has been baffling...I can not understand how the nets held up the later part of the week.

Best Regards,
Jim
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