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Strategies & Market Trends : The Rational Analyst
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To: Susan Saline who wrote (1008)5/27/1998 9:47:00 PM
From: ftth  Read Replies (1) of 1720
 
Nice roller coaster ride today, eh! The negative scenario going forward is if we take out today's lows fairly early in the trading day, over the course of the next week or so. (I guess it's only negative if you're net long).

If this plays out, we could see some meaningful declines. I know most of the experts (whatever they are) predict only a couple/few percent from here.

I tend to think we'll see what damage the new wider trading halt limits can do. I followed the late october double-limit slamming minute by minute, and felt pretty certain that almost any arbitrarily lower limit would have been hit. It was just an avalanche of selling, in free fall 'til it hit the stop.

Not that such a scenario is necessarily bad, assuming you took today's generous recovery rally as a chance to sell into strength (you may get one more chance). There'll be some "bargains of the century" if this does play out. But you gotta be quick to recognize the deceleration and reversal and have your buy list ready to pick 'em up intraday.

There IS a bunch of sideline cash, and it seems so many people are expecting this decline that it should self-fulfil. This cash is ready to bargain shop, so I expect an intraday reversal. I also am expecting it to be another 2-day'er.

I'll probably use the reversal up to the midpoint between day 2's open and intraday low as the entry point, but reserve the right to adjust this as conditions dictate.

But, NOBODY REALLY KNOWS. The best you can do is have an expected scenario that you're watching for, and adapt it with the market movements. You feed it if it acts properly; you cut it off if it gets too out of line. Gotta have those "boundaries of rational behavior" set beforehand though.

dh
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