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Strategies & Market Trends : MDA - Market Direction Analysis

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To: mishedlo who wrote (80777)	7/23/2001 10:36:03 PM
From: t2	Read Replies (1) of 99985

If the "pattern" continues and I hope it does, I will sell my PUTs on tomorrow's swoon down, wait for a half-assed bounce (which in turn leads to a markup in futures for Wed) then do it all again. I went websites of the biggest mutual funds..American Funds and Fidelity (not index funds). What I noticed at Fidelity was a slight increase cash percentage (more than can be explained by a decline in equity prices). May 31 to June 30 change for funds over 20 billion. American funds...i could not get data for May so I ended up comparing March to June cash holdings. There was a significant increase in cash levels of the funds over 20 billion. If the patterns are similiar at other fund families, it would basically confirm that the mutual fund investor does not bail out nearly to the same degree as the fund managers. That has been the case since 1997. This is just a small sample but it represents the largest individual mutual funds. I don't know if it means much considering how earnings have been deteriorating in the tech sector. These funds may continue to increase cash positions. The above is just some mutual fund information that is worth factoring into trading decisions. The danger to being short the market is that this increased cash level along with huge short interest could make for a big rally (whether it would be a bear market rally or not...i don't know). In addition, the case for moving money out of money market into high yielding value stocks is getting stronger every day and if that was to happen, sooner or later high PE stocks would also be affected. That is why I am basically trying to set up for a March/April type of market...fast decline followed by a rapid gain. I would not expect anything but a sharp reversal if the market goes lower. However, I am doubting the decline more and more--even though I am hoping for it (again for a rally setup). We have heard about the cash on the sidelines for a long time and I am starting to wonder whether we are getting very close to seeing it get put to work. Even if the recovery is expected in the first quarter of next year, this would still be considered a good time to buy as long term holdings for funds. I am expecting a huge increase in Nasdaq short interest in July and will be long just before the release of the data. Stayed long many non-tech stocks--oil/gas. Sold most of my Nasdaq puts/covered shorts near the end of the day ...a bit too early ...and went long the group ahead of Greenspan. He may change his tune to be a bit more optimistic and that could lift the techs and that was a risk I was unwilling to take...in addition to the Nasdaq short interest data release. (not aggressively long techs)

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