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

To: Monty Lenard who wrote (18505)	6/24/1999 8:09:00 PM
From: Les H	Respond to of 99985

Not a Yen for a free lunch (snippet below) decisionpoint.com It was particularly interesting to see rumors and analysts gravitating to our report last weekend; regarding a variation on the Yen carry trade; spotted here last Friday via the noted Euro/Yen cross trade. There are even (only somewhat ludicrous) spins on a story we provided, that stretch reported sales in Europe as intended to allow Tokyo players to sell European holdings, simply to leverage that money in Japan, buy more T-Bonds here, and capture a higher return. But, when a U.S. T-Bond market is ravaged, if the Yen isn't pummeled, you then have the same crowd forced to sell their T-Bond holdings before the higher U.S. yields are off-set by their eroding currency; a factor than (when it happens; or if that is already going on) tends to depress the U.S. Treasuries. One rumor making the rounds is that the Soros crowd is involved in this now; and that would be a factor if some of their sizeable holdings have been in T- Bonds (and we think that's the case), or in the derivative's play, or both. And this is the kind of thing (whether true regarding them or not) that we've warned of as typically capable of roiling a market in the middle of a stormy year. It also would explain why there's talk of a 7-8% long-bond yield later this year, even when domestic economic conditions, in-and-of-themselves, don't warrant such pessimism. But it is why we said not to watch the U.S. perspective myopically, and to understand how the backside of a derivative crisis could come back this Summer and/or Fall. It also ties into our warnings about all the LTCM rescuers wanting out by Q3, a factor that creates supply concerns of its own, and weighs on both T-Bonds and stocks until its resolved. So; that's how you get an essentially horizontal pattern in a U.S. stock market that's aborting the first efforts to rebound, after a typical post- Expiration downward move within harmony of a longer term pattern call here. We've not only recognized and responded to this (capturing good trading gains in the process in these recent days again), but also alerted you weeks ago to the prospect that any 4th of July rally could be coming from lower levels than seen at Triple Expiration's end. If so then the probabilities increase that any rallying into early July will be a sale; particularly if this ingrained optimism on the Street finds itself facing disappointments on the earnings front. In any event; this market will not make it easy; nor was it expected to. It's an elongated overall pattern call that's prevailed here for several weeks now, because this kind of market doesn't give up until it has to. That means that while the outcome isn't known yet, there's not going to be a free lunch for either bulls or bears; while traders should be doing quite well. Remember; there are at least 1 or 2 hooks that can derail the technical pattern we've been talking about this week; and one will be if the Fed hikes more than a Quarter percent, while the other would be disappointing earnings from more than a couple major multinational firms (not the knee-jerk responses typically heard). Either would be a negative; but the timing is crucial. (Specific rate hike response call's reserved.)