Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: Stcgg who wrote (21)	10/22/2000 10:28:09 PM
From: tradermike_1999	Read Replies (3) of 74559

Who is Bob Brinker and what does he base this on? One problem with saying that the market is overvalued or that it is going to crash is that people have been saying this for years. People have been using statistics to make plausible arguments that show that the market is overvalued. In the summer of 1999 a lot of people claimed that the market was going to crash and it looked horrible in Sept-Oct 1999. We got a monster rally and I believed the rally came because Greenspan pumped a lot of liquidity into the banking system in fear of a Y2K crisis. I thought that once he pulled that liquidity out he'd be setting the market up for a violent crash. We got it. But I remember telling someone last December that I thought market would dump by the end of January or February. It was just a guess. I was wrong. My reasons for a crash were correct, but the timing was way off. I trade stocks by using technical analysis - AIQ and TC2000 software - to identify moving sectors and stocks. And to see what the broad market is doing. On April 4th I left the house around lunch time to run some errands. Listening to the radio I heard the news that the stock market was crashing. By the time I got home it had bounced right back up. That night I looked at the charts, saw the double top on the Nasdaq and the horrible A/D line among other things and got convinced that the market would crash within a week. I sold on that rally and went short, we know what happened next. The point of this isn't to brag about how good of a trader I was - if I was really good I would have shorted when we had the March double top and again this August when the Nasdaq failed to breakout again - but to point out that it takes more than just fundamentals and comments on the economy to make me want to take action. That's important though to know what is going on and be prepared to take action when the signals indicate it's time to do so - but just making the arguments based on stastitics and fundamentals isn't enough. If you would have done that you would have missed out on last year's rally. It's like this professor Schiller - author of Irrational Exuberance. He's gotten a lot of press this year and his book came out at just the right time. But he's been making these same arguments for years. If you would have listened to him you would never put money in the stock market. That's silly. We can talk about the market, understand the forces that have the potential to unravel it, but I trade off the technical action of the market itself. Right now its a little ambigious to say the least. Really need to see what the next pullback does. It does appear for now that it has put in a short term bottom - and that would give us something of a rally towards the end of the year - but we'll see. It's next year I'm concerned about.

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