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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 685.40

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Jan 21 4:00 PM EST

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To: HairBall who started this subject	7/8/2001 1:35:45 PM
From: exeric2	Read Replies (1) of 99985

Have been lurking on this board for quite a while and it has gradually been sucking me in. I finally decided to give up all control and have abandoned myself to a life of petty bickering on this thread. I hope that pleases all. I am a technical trader myself but mostly just NDX globex mini futures. I don't pretend to know about individual stocks. They never seem to do what I want them to do when I want them to do it. I will say one thing: I've heard plenty of things here I both agree with and disagree with. Even though I do my trading using TA I think there is a place for fundamental analysis in trading. The period we are going through right now is an obvious time. I've heard many people say that we've hit bottom and worst case scenario is a retest of that. (I'm using SPX in my example). There are numerous technical reasons why I agree with the fact that we will do a retest as a minimum. First and most importantly, if you look at VXN amd VIX they are still very low. I believe in sentiment indicators and people are just way too optimistic. We will at minimum test the old low. Here is where fundamental analysis plays a role. Historically the average P/E on a S&P 500 stock has been about 15 the last half of the 20th century. The latest Barron's shows that it is now at 26. We have had an extreme bubble in the 90's. Sure, you couldn't make any money if you had used fundamental analysis in the 90's but it doesn't mean the old ways of measuring valuation are not valid. What is key to making money while trading is to realize what standard to use for your analysis and when to use it. The 90's were not the time to use historical valuation. Does that mean that in 2001 it is still invalid? The fact of the matter is that things remain the same until they don't. In the late 80's most people would have thought disregarding valuation was something only a fool would do. The 90's proved ALL OF THEM wrong. The same thing could happen again in reverse because things remain the same until they don't. If stocks return to the old measures of valuation the lows on most indices (especially the NDX) will be breached like a hot knife through butter. It may not be on the first try but it could happen. Don't fool yourself. Things remain the same until they don't. This is actually a copy of a message I sent to Dr. Bobs thread but seeing as that thread and this are my favorite forums I copied it. Guess I'm lazy.

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