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

To: TRINDY who wrote (22553)	8/9/1999 9:17:00 PM
From: pater tenebrarum	Respond to of 99985

Trindy, a very balanced view, and one i can largely agree with. except that i think the utilities don't look so good - seems to me they have just produced another bearish flag. actually the semis have a history of holding up well when interest rates rise and are often the last group to buckle. this is due to their deep cyclicality - they are not tech stocks in the traditional sense. and i think you are quite right that we are on the precipice and that it is far from clear that we will fall off as you say. i would take the combination of a plummeting a/d line that is not confirmed by plummeting prices as a bullish signal in a 'normal' market, that is to say, a market the primary trend of which is still intact. whether that is still the case, largely depends on where interest rates are going from here. the bond looks very oversold but has yet to confirm that it is putting in a low; there are rumors floating around about forced unwinding of Yen carry trade positions by a large hedge fund. if there is any truth to these rumors, the bond could easily come under even more pressure, in which case the falling off the precipice would be all but assured. i am still more inclined toward the view however that a short term low in stocks is near - if i am correct about this, i would view the ensuing rally as a shorting opportunity. i have reviewed scores of individual stock charts over the weekend to get a 'feel' for the undercurrents in the market. what i see is some leading sectors and stocks breaking down alarmingly, while the indices are apparently held up by money fleeing into liquid issues, i.e. the ones that can be exited easily. what i also see is a vast list of hi-tech high-flyers (and that is not including the nutz, the crash of which could still prove to be a nasty portent of things to come) that have barely corrected so far and were in many cases obscure names before the astonishing rally from last october's lows brought them to the fore. there seems to be a surfeit of 5-, 7-, and 10-baggers that is simply astounding, and in a way most of these stocks are involved in the internet-led communications revolution. while i do not doubt the growth potential for many of these co's for a minute, i just happen to believe that a market cap of $8 BN. for a company with $30 MIO. in revenues and $34 MIO. in losses is a tad rich (the example concerns JNPR, but there are tons of similar stocks). my conclusion is, that even if the market should manage a short term rally from here, we will not have seen a meaningful low until all the enormous excesses have been washed out. the longer this 'wash-out' is delayed, the more painful it will become imo. if against all odds the market races to new highs from here, i will have to re-evaluate my position, but i don't think that will become necessary. i do not necessarily see a BK around the corner, but we have at least one meaningful correction every year, and this year is unlikely to be an exception. consider that we are clearly in a mania, and most people know it. thus there is a constant undercurrent of nervousness in the market, that serves as the 'wall of worry' to climb on during good times and leads to everybody rushing to the exit once a year just in case...<g> regards, hb