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Strategies & Market Trends : Moomin Valley (formerly Troll-free Zone)

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To: Moominoid who started this subject	2/11/2002 2:06:48 AM
From: Moominoid	of 2852

These are my scenarios that I update as things change about once a week - just edit a little each time: 10Feb02 Macro Scenario: This rally has been fed by the Fed's pumping and interest rate cuts, but eventually bad news seems likely to stop the momentum. My macro-economic scenario calls for the US dollar to remain strong for the next few months despite interest rate cuts. Foreign investors are selling US stocks and buying bonds – they don’t seem to believe that the interest rate cycle is over but that stocks have risen too much. They are likely wrong on both counts. Non-tech stocks seem fairly valued given low interest rates, but tech stocks are still very overvalued. I still feel the trigger for the slump will be when the dollar begins to reverse triggering foreign capital withdrawal from the US. Overall I see a W shape recovery. As the first stage of the recovery proceeds interest rates will begin to rise. Layoffs also tend to lag economic output. Both these will mean that house-prices will begin to fall and loan repayments rise. This will put pressure on consumer spending and on bank viability. This is the second dip of the recession a la 1982 or even the 1987-1990 running correction cycle which seems to be wave 2 of the advance from the 1980s and now we are in wave 4. The beginning of the turn around in the US Dollar is being sensed with the clear completion of a multi-year zig-zag correction in the AUD and some signs that gold is turning around too. BOE has only one auction worth of gold to sell and scheduled and signs other banks are looking to buy gold now. Consolidation in the gold sector, reduction in gold hedges, buying by Japanese and other gloomy investors etc. will help raise the USD price of gold. However the Yen is falling and could fall some way and this is where the currency markets are focusing for the moment. In the long-run Sterling needs to decline relative to the Euro in order for the UK to enter the Euro system and BOE cannot sell further gold for the same reason. Technical Analysis Scenario: The Elliott Wave Scenario is that we are now in wave C of B on the main crash in the NDX. I believe that 3 of C started on Friday 8 February after a nested ending diagonal completed wave C of 2. The index overshot a 50% retrace by 4 points. Alternatively we are starting C of B starting from 21 September. Using other TA things allow for at least a 100-200 point bounce as in June 2001. However, there on 1 Sep 01 Rydex investors were just as bearish, stochs were oversold and things still failed. Using Hueb’s EMA144 crossing SMA200 we are at a knife-edge with the buy signal about to be negated. Dec 6 is seen as the end of wave 1 on NDX, after which we appear to complete an ABC zigzag. On the Composite Jan 9 could be the top but I’d like to see it match up with the NDX and stochastics. So that rules us out now being in a down impulse – i.e. the big wave C. In the past I would have worried about the McClellan summation but I am including that in my E-Wave read too now. The monthly stochastics are threatening to cross – a strong rally in the remainder of this month can save us from that – the location of the weekly stochs supports the rally. My own TA method shows significant bottoms in SPX (daily - bimodal 6 channels), NDX (Weekly – r10, daily 6 channels), NCP (became leading indicator – 7 channel reversal). KKD has a 2 channel top. The major B wave is likely now an expanded flat. I see the NDX rising 1000 points in wave 3 going sideways in wave 4 and to maybe 3000 + six months from now (a 50% retrace). Wave C could then take the NDX to levels of around 700 by mid 2003. The final NDX bottom would give a very below normal return of less than 6% off of the 1994 bottom. This would allow a very substantial rebound (to c. 1200 for a normal return). I am also now analysing the gold market and individual stocks using E-Wave. KKD has completed 5 waves up and now is in 3 of A down. LOK is now starting wave 5 of 3 in it’s current rise. Mayne is unclear - it seems to be in a B wave triangle which would be bad news but could have completed an ABC correction. Newcrest just completed wave 5 up. The gold price seems to have completed a 20 year ABC correction and now is completing a 5 wave leading diagonal. The phase is such that the gold price tends to move opposite to stocks. The ABC expected correction in gold should match the 3, 4, 5 up-move in stocks followed by C down in stocks and 3 up in gold!

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