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Politics : Idea Of The Day

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To: IQBAL LATIF who wrote (18115)	4/29/1998 3:16:00 AM
From: IQBAL LATIF	Read Replies (1) of 50167

Back on 23rd April as soon I reached here I wrote this post to Ray- To: +Ray Smith (18109 ) From: +IQBAL LATIF Thursday, Apr 23 1998 6:35PM ET Reply # of 18209 Some excerpts- '1130 on SPX was unable to hold. I would expect tomorrow to see SOX edging up to 320 a retracement for a day is alright after a huge move. However if SPX closes below 1130 again I wil like to go defensive below 1118 that is a trade which will only define my strategy of long techs and cautious about overall market. I totally believe that the move in techs is bound to come which takes us higher then 330 resistance which seems a formidable one at the moment. I also believe that SPX or SPM momentum is fading I can see it clearly but the decline may not be as sharp as expected since banks story is still not fully out. I expected this 1130 resistance to hold and I highlighted it in my morning post alongwith my astonishment that MSFT traded higher post number althought it should have drifted lower after a greatr run even beating the upper whisper. In these conditions I am looking at economic sensitive numbers to rattle the markets, I would like to go into ECI a little well protected. I think wage pressures will show up in this number albeit with no consequence but market next Thursday may overreact, me being a cautious person will like to position myself for a quick hit and run.' Now looking back it looked a good call to go and buy some puts after a break of 1130 but I also raised a week ago consequences of ECI on the market- this is the number if you all remeber is closely watched by AG-- we are expecting it to be .9 and so is the market but if the number is above 1.1 we will see market possibly retreating to as low as 1799 on the composite I see 1799 as a solid support they would suck lot of people in below 1799 but watch out, in my opinion the test of 1799 on composite which will translate to around 1068 on SPM-- we may look for reversing our positions I will on test of 1799 expect a recovery but all of this based on expectations that this level on composite to hold. SOX in my opoinion will test 298 in case of a bad number but I would not like to predict a stance beyond ECI-- on the other hand if ECI shows no inflationary trends in services wage sector we will see bond opening much higher and so will the market- on a seperate issue overall fundamentals look good for the PC sector the growth has been phenomenol during last few months in france and UK as the prices coming so is the increase in demand-- we saw an increase of 24% in PC sales in UK and France these are the two markets which show the level of pent up demand in Europe as a whole so for me dips in Techs will remain an opportunity may be some of the PC makers like CPQ are good stocks to look at.. Also look for that discount in S&P cash and futures -- you all must have noticed that S&P futures trade at a premium to cash but in a fast market this premium changes to discount which gives rise to the possibility of arbitrage- I have noticed that if this happens too many time during a panic motivated market it is the earliest indicator of lack of selling depth. I was noticing this last Monday and could distinctively remeber two or precisely three ocassions when the discount of futures to the cash was in excess of 5% the moment cash does not follow it is clear signal that market is about to reverse. On ASEA mixed feelings South Korea strongly reversing gaining some earlier big looses during April-- whereas Japan still trying to find that bottom which so far is seemingly out of sight but for me the action is suggestive of base building it may take a little longer but Japan in my opinion is turning around. We did not see the kind of follow up selling what was the hall mark of global markets back in Oct that is a sign of maturity but market is looking for some confirmations of ECI and other numbers -- a sustainable rally in ASEA is in offing if ECI does not rock the markets. Instead of mad selling may be the right course for the markets would be basing in ASEA and taking out important resistances. This normalcy in ASEA and Europe on one hand is good but other as I expalined yesterday raises chance of interest rate hike in case numbers in US start coming stronger than expected. I would assume that until 8th of this Month we will see higher voltalitiy, I would recommend every one to take oportunity to go long above 1105 on SPM and short below 1085 I will cover between 1060-65 my shorts. I will also closely co-ordinate my move with what is happening to composite if 1799 is taken out I will like to keep my protective positions running.

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