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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 694.04

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To: James Strauss who wrote (48642)	4/29/2000 1:18:00 PM
From: Michael Watkins	Read Replies (2) of 99985

As for 401k's, there are tens of millions of Americans who have automatic deductions from their paychecks on a weekly or bi-weekly basis... It all adds up... That money continued to be with drawn over the weeks that the market tanked and clearly provided no support. 401K season provide no tangible support. RRSP season in Canada provided no support; so I think its safe to discount automatic contribution plans for support going forward. Also, as experienced in the past few years One of the problems with the market is that everyone (both sides of the fence) assumes that history will always repeat itself in the same way. One thing is for sure, volatility on the Nasdaq is at historical high, and in fact has dramatically increased (80%) since Nov 1999. The big players are getting crushed by it; I am not so sanguine to imagine there won't be a similar impact on the average small guy. Having said that, I personally just go by the charts. At the moment they say "I don't know". Perhaps that will change in the next week. It would be wise to look at the COMPX on weekly and monthly basis. On the weekly chart, this past week made a very marginal new high, and a higher low than the prior. Ignoring that it was marginal, well count that as a positive. As a negative, there is plenty of overhead resistance to work through. On a monthly basis its interesting to note that the COMPX is close to touching the 20 period exponential moving average. Each prior correction has blasted through that moving average before reversing. Again -- history may not repeat but its worth considering. Volatility extremes, valuation extremes -- there's ample reason to be suspicious of rallies at this point.

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