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Strategies & Market Trends : Analysis Class for Beginners
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To: Arthur Tang who wrote (641)11/5/1997 3:34:00 PM
From: Arthur Tang  Read Replies (2) of 1471
 
There are two ways to analyse Wall street.

One is the famous thermo-dynamics analysis method. Which is treating Wall street as a box. 401k money (liquidity) comes into the box; and salary and expenses goes out of the box. More money comes in, the total value of wall street goes up. No money comes in, the salary and expenses pulls Wall street values down.

The other way is also instantaneous analysis method. It is the cash reserve vs. stock value approach. As stock value rises, the cash reserve in percentages reduced. This means the market is not as liquid; and Wall street value will have to come down to balance the cash reserve for a normal day's trading. If not balanced and dragged on for a reasonably long period; then a crash is very likely. The crash is caused by the first person deciding to take his money out first. A run on the market follows; then the crash. Liquidity guaranteed by FEDs usually prevents any crash at all.

Percentage of cash on hand held by mutual funds, give us a good idea if there is any danger. Otherwise, the money going into Wall street tells us the height of the market as well as the limit of the market. If money going in to Wall street equals the salary and expenses then market will be very dull. It drifts or shifts side ways. Currently it is broadening the market. Small stocks finally appreciating.

With 401k at about $100 billion a year, we will continue to see many good returns for many a year.
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