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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 662.72

+0.4%

Nov 19 4:00 PM EST

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To: Jacob Snyder who wrote (28850)	10/8/1999 7:13:00 PM
From: pater tenebrarum	Read Replies (1) of 99985

Jacob, probably not...interstingly, investors continue to be positioned as if they thought the bond is about to turn any moment: decisionpoint.com however, the chart of the bond futures contract looks not very encouraging: tfc-charts.w2d.com imo, the Fed and the ECB are behind the curve. some have suggested that the only reason both have refrained from raising rates at their most recent policy setting meetings is that certain banks and hedge funds who are caught in interest rate related derivatives positions are given a chance to unwind before they get even worse. if that rumor is true, we have to assume that the bond market will sense that not enough is being done to keep inflationary pressures in check. if the bond market accordingly embarks on a new leg down, the exuberance in the stock market will quickly give way to a bout of selling. as things stand, stocks are currently 40% overvalued using the Fed's model for fair value: yardeni.com this is by far the gravest concern i have with regards to the stock market: that yields could break to the upside and lead to a massive shift in asset allocation. that's essentially what happened in '87. it is remarkable that there seems to be a lot of complacency out there with regards to the cratering bond and what it might mean for stock prices. regards, hb

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