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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 660.19

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To: fedhead who wrote (13999)	5/16/1999 11:12:00 PM
From: pater tenebrarum	Read Replies (1) of 99985

Anindo, <<But in 1987 hadn't the bond been falling for nealy a year before the stock prices corrected sharply. There was a period when the bond was falling while the stocks were going up. IMO we are reverting to the pre Asian crisis scenario. Thanks Anindo>> the bond went down for approximately 9 months in 87 before the stock market caught the flu as well. whether we truly have reverted to the pre Asian crisis scenario or not remains to be seen. though the recent performance of the japanese stock market seems to suggest otherwise, japan looks in many respects still like an accident waiting to happen. so does china. the banking system in both countries is a hair's breadth from collapsing and the effect of the japanese governments rescue package is so far largely psychological in my view. the credit crunch in japan is still very much in force. the combined open positions of the 20 largest japanese banks in various derivative instruments have a notional value of over four times japans GDP. the 'final shakeout' in japan has probably just been postponed. if on the other hand the asian recovery is for real, commodity prices will eventually rise strongly and start fuelling inflation. the stock markets current valuation reflects neither of those possible scenarios. regards, hb

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