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

To: bobby beara who wrote (21325)	7/28/1999 7:49:00 PM
From: KM	Read Replies (1) \| Respond to of 99985

I admire your ability to see what's there and play accordingly instead of getting locked into a dogma about valuation, mania, etc., which causes many to miss pretty decent money making opportunities.

To: bobby beara who wrote (21325)	7/28/1999 7:52:00 PM
From: Benkea	Respond to of 99985

bobby: re: yhoo securitytrader.com PS. I bought back a covered call position (sold the Monday before) in CMGI and SFE Monday just before the close - very lucky (so far).

To: bobby beara who wrote (21325)	7/28/1999 8:36:00 PM
From: pater tenebrarum	Read Replies (3) \| Respond to of 99985

Bobby, you could be right; as i have mentioned in an earlier post, short positions on many nutz have increased sharply recently. coupled with the general negativity towards the group this could produce yet another short covering rally, with the momentum players jumping in as well. note that YHOO has reversed up from it's 200-dma and managed to close above it. from an elliot wave perspective i believe we have just seen 1 of 3 and get now the counter-trend 2 of 3 which shouldn't carry too far. i count the first downwave to have started from the april high - it went down in clear five-wave fashion. this was followed by wave 2 in the form of an a-b-c correction, with (a) starting from the head of the small inverse h&s which was the starting point of the mini rally that formed the right shoulder of the greater h&s pattern (in (c) of the a-b-c correction). considering the extremely clear wave pattern it can be safely concluded imo that the nutz have entered a bear market. i don't see anything on the horizon that is likely to change the picture presented by this wave count. the test of it's correctness will be as follows: the bounce that has started today should produce a lower high than (c), the famous right shoulder; subsequently, wave 3 of 3 should carry the whole group perceptibly below the 200-dma and produce a low below the head of the small inverse h&s that has recently failed. currently the market, and the nutz sector specifically, are susceptible to wild mood swings, from extreme enthusiasm to extreme caution. this is more than evident in the heightened volatility and the gyrations of the p/c ratios. my conclusion is that the market may well go higher, but will have more frequent and violent corrections, as 'the' top draws nearer. that way, most analysts will continually be thrown off course, a la Acampora, who is forced to constantly revise his opinion due to the market's action. eventually a bigger-than-average sell-off will start and i expect the nutz to be the leaders on the downside. i have no idea what will ultimately trigger a severe downturn, but there are worrying developments that bear watching. a quick recap of same: credit spreads are widening to record levels; the 10-year swap spread stands at 100 bp.'s, which is more than at the height of last year's crisis. it normally fluctuates between 0,35 and 0,50 bp.'s. obviously something worrisome is happening in the derivatives markets, perhaps a big player has his back to the wall. a reason for this worry could be the weakening dollar; the yen carry trade is under water, and we may see another hedge fund go belly-up because of this. the more obvious problem are the market's weak internals like the horrible a/d divergence and the NH/NL indicators, which continue to deteriorate. of course none of these things are any good for timing purposes. their effects could be felt tomorrow(not very likely), next week or next month. but they are saying that the bulls are in danger of overstaying their welcome. having said all that, i bought into the nutz myself today in expectation of a bounce. we'll see how far it goes, probably a fibo retracement of 1 of 3. note that the yen continues to rise in asian trading and ECI & GDP may well upset all short term calculations tomorrow. regards, hb