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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 671.91

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Nov 14 4:00 PM EST

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To: bobby beara who wrote (27727)	9/28/1999 6:49:00 PM
From: pater tenebrarum	Read Replies (2) of 99985

Bobby, since an ST cycle turning point was scheduled for today, we may get a little bit of a rally out of today's reversal. however i noticed that the last ST cycle which was supposed to produce an almost uninterrupted rally from August 10 to Sept. 28 reversed course at the half-way mark, which leads me to suspect that perhaps a larger degree cycle that has crested is pointing down now and in control. as much as WS would probably like it, bear markets are not yet outlawed. since the change in inflationary trends you mention is mainly confined to input inflation at this time the non-tech non-financial sector is suffering a severe margin squeeze while the financial sector feels the impact of rising rates and credit spreads. this would explain the relative outperformance of the NAZ vis-a-vis the Dow and the BKX lately. i will admit that the bulls have a few things going for their cause (calling bottoms every day is not one of them), at least in the ST. for one thing, NAZ short interest is scaling fresh heights as the bears mistakenly short the heck out of the relative strength leader; another point of note is the oversold a/d line and the oversold conditions in general. the increase in bearish sentiment, as evidenced among other things by Acampora's call today and the decline in bullish percentages in the polls is another factor in favor of the bulls. but on the sentiment front i detect a few suspicious facts: the bearishness expressed in words has yet to show up in deed. the options data point regularly to hefty rebound speculation and very little hedging or speculation on more downside. obviously the one thing the latest sell-off failed to inspire is fear. the bond market meanwhile seems to have a less sanguine view of what's transpiring. the flight - to - quality bid seen last week has evaporated and the onus of proof is therefore still on the bulls, as the stock/bond yield ratio continues to linger at absurd levels. at the same time, money supply growth has finally slowed this year as the Fed slowly but surely becomes more restrictive. so the bulls cannot count on the mountain of liquidity anymore that has driven the market in recent years. this year the main source of inflows into the market came from foreign funds which have pumped record amounts of money into U.S. equities, especially from Europe. so the dollar probably remains the key to the market in the intermediate term and in view of this i'd say the bulls are celebrating too early, even if we should get a bounce for a few days here. regards, hb

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