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Politics : Idea Of The Day

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To: IQBAL LATIF who wrote (15859)	12/21/1997 11:14:00 PM
From: IQBAL LATIF	Read Replies (4) of 50167

Jpn closed below 15000 for the first time on banking fears- I was looking at the yield curve this configuration indicates a slow down, if you remeber last time I predicted a rally on stronger number I based my predictions on this particular strange configuration of the yield curve- I see that investors sentiment is negative and they want markets to fall since they have factored a slow down but numbers are not suggestive of any slow down so far- durable goods orders or cap utilisation or the other are pools apart again either investors are right and bonds are smelling troubles much ahead for equity markets or this bond rally is a mix of 'fear and flight'. I am going to pick the later and not the former until numbers confirm a slow down- the first sign would be weaker economic number if this markets needs to go down below 910 we need numbers emanating from various departments as weak numbers- even Gold prices if you read the weakness it perfectly blends with 'slowdown scenerio'. If you look at 'yield curve' and 'gold prices' although both indicate a slowdown- the flattening of yield curve and falling prices of gold are indicators and foreshadow a sharp slowdown in economy but the problem this time is that this flattening of curve this time around is not initiated by Fed- now concentrate on what I am trying to say a little more- I see a trap here the narrowing of spreads is a result of raising of short term interest rates closer to long term however now short term rates are stable and long term rates are falling under expectations that growth would slow- if you look at history of last 30 years of rate configuration the flattening of curve enmanating from investors believes and not Fed tightening for me and many other economists is not a definite indicator- the brisk numbers so far have not indicated any slow down- however gold prices slow down is more of a solid indicator of a slow down. Other school of thought thinks that short term rates are reflective of supply and long term rates reflect demand so present scenerio of the yield curve is a slow down case for them as if you read this with Gold price you will have more of a definite reading of impending slowdown. Now I have not subscribed to the above may be foolishly so but for me econokic indicators need to come out of the market and not the other way round it is now that markets are driven by what investors thinks is gong to happen and I certainly believe that world growth slow down from 3.@% to 2.6% (IMF) in 1998 is not a kind of slowdown which requires the present configuration of the yield curve- the ASIAN slowdown and Japanese sell off are percieved as threat but to write ASEAN economies off is not prudent- banking fears are also blown out of proportion therefore for brave hearted this is a opportunity if our read of contradiction is right and Japan and most of the markets may be preparing a base for break of 16800 resistance. My strategy calls for caution but a strong number if initiates a selloff should for you a signal of going long after the selling subsides whereas weaker number like a sharp drop in non farm payrolls or decline in durable goods order or reversal of cap utilisation should be ocassions to establish short positions -the market heading for a big surprise if what we raised here is right we are in a rally and will close above 8000 but if numbers start depicting a weak economy I will go with history and expect DOW to visit 6800 level by March of 98. On short term I will look at following upside resistance- 962 area on SPA 7780 on DOW and 275 on SOX I am looking at bonds to test 118 once again soon and a corresponding close of DOW above 8000- now we don't have a crystal ball to look into future at the moment keep yourselves glued to numbers emanating from various departments. I see silver lining in the dark clouds. On supports a break of 240 on SOX is highly unlikely but my strategy of spreads should work fine but if we break 240 we will see INTC below 60 although a far cry but now that most of DD's and networkers are languishing much of major damage if any will most likely come from INTC or MSFT- I am sure MSFT at 110 will lead SPA to 910 this uncertainity around MSFT more then business prospects of MSFT is damaging for the stock0 MSFT is likely to be under pressure from now to Jan 14th so tighten your seat belts if you see contined weakness in MSFT. My opinion is that INTC should probaly reerse from somewhere here give and take 5 points and MSFTY will test 117 not 110 - Nekkei technical break of 15000 today will not see a second close below 15000 tomorrow- if it happens we will see a test of 14450 soon and prospects of ASEA start loking once again very shaky purely from confidence point of view lets hope Nekkei come back up and above 15000 and resumes its march to 16800 this will lead a good solid signal for DOW to close the year around 8000 otherwise we will see DOW in face of second close below 15000 couple of hundred points lower but SOX will not follow suit rather may be we see some flight to quality we compulsive players of the markets keep our option open - Ifind a trade every day with my convulated ligic thrill and action is not in short supply with me sitting here and adding new dimensions to what is apparently the most intersting and largest casino on the face of this earth- Best of Luck Merry Christmas and Happy New Year- Time to go back to work. See you soon . Sorry ofr taking up so much of your time.

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