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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: PJr who wrote (18499)	6/24/1999 9:08:00 PM
From: pater tenebrarum	Read Replies (1) \| Respond to of 99985

Patrick, i currently envisage two possible scenarios: the more immediately negative one is based on the assumption that the long bond continues to plunge (say to a TYX of 6,5% or more); in that case i would look for a massive correction of 25-30% to occur concurrently and quite possibly even in BK fashion. a more likely outlook imo is that the bond finds a bottom soon (at least for the short term), perhaps in the wake of the FOMC decision, and retraces 1/3 - 1/2 of it's decline; i would then expect the stock market to race up in a broadbased rally toward a blow-off top. i have no fixed target for this scenario, as i tend to tackle the market day by day (the aforementioned extent of the decline in the negative scenario would likely be revised as well according to the parameters then obtaining). i have heard of a Dow target of approx. 13,000 based on elliot-wave/fibonacci relationship based analysis and it sounds doable to me in the case of a blow-off. if such a blow-off rally were to develop from here, it would probably end with a sharp reality-check reversal due to a combination of further tightenings by the Fed and Y2K concerns. some people argue that the blow-off has already been seen in stages, with the nutz blow-off in april and the Dow's lasting into may. it is possible that they will be proven right. i feel reasonably certain though that due to the long drawn-out trading range in which the SPX and the COMPX have been mired, a breakout of significant magnitude is not far off. the direction of the breakout is a function of the bond market. as to the bond market itself, i have posted my views several times already: it is clearly in a bear market; sentiment is extremely bearish though, it looks oversold and sits at an important and strong support level; therefore it should bounce for a retracement rally soon. however, before such a bounce is clearly evident, it can not be taken for granted that it will happen. perhaps the trading range (in the stock market) will continue for a while yet, in which case the breakout will be all the more significant. before you accuse me of saying that the market will either go up,down or sideways<g>, let me come back to the point: interest rates are the key to this market. the mania can only rage on if they reverse course. regards, hb