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Strategies & Market Trends : MARKET INDEX TECHNICAL ANALYSIS - MITA -- Ignore unavailable to you. Want to Upgrade?

To: JLIHAI who wrote (238)	6/28/1999 1:36:00 AM
From: J.T.	Read Replies (1) \| Respond to of 19219

JLIHAI, I think you are right about yields going back below 6% if the bond traders don't sense or read into any unexpected third quarter point rate hike. I believe 1/4 point is in the cards for June and, another quarter in august. If economic numbers show full force this month and into august, it becomes equities nightmare that fed may have to move to raise 1/2 point in august and be done with it. Chance of this happening is probably less than 15% since Mr. G is gradualist. Here is another twist; FOMC meeting is Tuesday and Wednesday and they raise it 1/4. Stock and Bond Market rallies hard. Then Thursday NAPM numbers come with vigor and gusto and Friday's employment numbers show May upward revision and robust June. Enter the 1/2 point potential expectation equation and market quickly reverses. Of course, we all know the goldilocks story all too well and if perception of soft landing is generated market breaks out and heads to coveted 1450 SPX and 11,500 DOW. The problem is one of investor expectations. Bonds have done a good job already factoring in two rate hikes and should rally on any rate cut below 6% to 5.88% area. If stocks tank you get flight to quality and yields will gravitate back to 5.5%. I f(but then could move back up to 6.5% under full-heat economy scenario). Stocks on the other hand, have done a poor job with expectations. There is little room for error here, imho, since only 1/4 is factored in. Once immediate talk of second quarter filters into the street, the money managers will reposition portfolios and this will only benefit bonds. Best, J.T.