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Strategies & Market Trends : Stock Attack -- A Complete Analysis

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To: Lee Lichterman III who wrote (19788)	3/6/1999 10:04:00 AM
From: Robert Graham	Read Replies (2) of 42787

Look at the increasing volume and the improving breadth indicators. Also note the barrage of negative news that came out which could not mark down the market. Earlier even some of the blue chip techs began to be accumulated at their lower levels by some professional money. The sentiment has begun to shift in the market to a more positive bias. Note the runup before today's economics report which is very unusual in this market environment, and doing this under heavier volume which is validating the move up made by the market that day, which has been a follow through move from the previous day's gains. Another telling indicator was when highly visible bellweather stocks like DELL and even MSFT broke down and the market still continued to remain intact, as amazing as this should appear to anyone who has been following the market. We even had INTC recently break down with only a very temporary effect on the market. This market is still alive and well, which I must admit has surprised me. But I have been only able to see this by leaving my placing my previous bearish market bias aside for a look at the market. The trick here is being able to see the forest from the trees. It is important to understand the time frame you are operating in as a trader. Also I have been recently reminded myself that it is the stocks that you are following as a trader and their short term direction that matters to the trader more than the market indices themselves and the longer term view of a top being formed which will get here when it does. Furthermore, the technicals do not show the whole picture. Sometimes they can lead contrary to the direction the market will go. This happens at junctures in the market where the technicals can give off conflicting indications. Add to this lights volume and high volatility, and even some of the best end up being confused. John Murphy who I think is a good technician is a consistent example of this phenomenon. The pullback likely to come next Monday will be more revealing of the near term future of this rally. Also I think the S&P 500 will need to validate the breakout of the DJIA. I see that many who use sentiment measures for their contrarian strategy to the market were surprised at today's move up by the market as represented by the DJIA. I am sure many of these contrarians are denying that it is actually happening. I find many traders talk up the use of sentiment based indicators, but very few traders really understand their actual significance. They want that easy number that can then be translated directly into a meaningful statement about the market. Amazing! How naive! As it is, the bullish sentiment those same indicators have revealed can help the current rally by walking more money back into the market. Apparently this is already happening today with bonds being sold towards the end of the day to move money into stocks in anticipation of a further continuation of this rally. There is much money in money markets waiting to enter the market. Time will tell at this point. I am not saying the market is "blasting off" here, but I see evidence of a near term upswing in progress. We will see Monday if this rally will continue. One step at a time here. The market will show you where it wants to go if you know how to see. My longer term concern is market leadership. The pattern of selling the techs on market strength does not bode well for a market that needs its leadership. What we are seeing in tech leadership is rather weak and may only be the result of "value oriented" buying from oversold levels. Bob Graham

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