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To: X Y Zebra who wrote (66142)	7/3/1999 1:20:00 PM
From: Sarmad Y. Hermiz	Read Replies (1) \| Respond to of 164684

>> My trading is based in a combination of Voodoo (T/A indicators such as MACD, +DMI/-DMI, ADX,) with a prescreening of "sound" companies, with a relatively volatile trading history... eyeing companies that have recently "suffered" a shock in price... << That post was a "tour de force" sp?? My own trading is summed up by the above quote from your post. Except that for shorting, I look for un-sound companies that have experienced a surge in stock price. My grave mistake in December was lack of attention to psychology. I think I have now learned this lesson.

To: X Y Zebra who wrote (66142)	7/3/1999 5:38:00 PM
From: GST	Respond to of 164684

Gaston -- Interesting post. But you refer to a form of 'liquidity' which plays a minor short term role IMO -- cash on the sidelines. When I refer to 'liquidity' I mean the creation of money out of thin air -- call it 'credit' if you like. The more 'credit' that is available, the more 'liquid' the market can be. Last year we saw a 'credit crunch' in Asia. Asian financial assets became completely 'illiquid' -- their credit lines were just chopped off by international financial markets. The code words for this were 'the widening yield spreads'. Countries were paying overnight interest rates over %100 -- can you imagine that? The unprecedented burst of credit creation in the US was meant to stop a complete worldwide meltdown of asset values -- and this drove financial asset values higher in the US. Stocks and bonds in the US now rest on this sea of liquidity -- easy to obtain, cheap credit. Tighter credit has the potential to stop the appreciation of financial assets in the US dead in its tracks. Abbey Cohen will say things like 'stocks are modestly over-valued' in response. A tightening trend, however, is much worse than a tightening itself and this is what has the power to cause stocks and bonds to drop -- significantly. Sure, cash on the sidelines has been building up because of uncertainty, i.e. 'Is this a one time tightening or a trend?' Unfortunately, the prospect of global economic recovery points towards a tightening trend and not a one time event. This only shows up in our economic data over time -- which is why so many people say "huh? I don't see the data". But the bond market sees it. That gives us a little while longer to celebrate earnings season with higher stock prices -- but watch out -- it might be a short summer.