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

To: Matthew L. Jones who wrote (24046)	8/28/1999 7:37:00 AM
From: Benkea	Read Replies (4) \| Respond to of 99985

Ths guy has been on the money so far, so here what he has to say this week: "MEAT GRINDER MARKET In our 8/23/99 commentary we stated: "We believe that the market is now in the midst of an impulsive upleg that will carry to new highs, and that should last well into our next intermediate-term turning point date in late September... Of course, with the stock market at such lofty valuations we must always be cognizant of the downside risks, and thus must be on guard in case the market begins to show signs of diverging from our forecasted path. With the McClellan Oscillator currently hovering in the neutral zone at the time of writing, we would view any sharp deterioration in breadth and a trip back below -50 by the McClellan as a big negative here. Also, with T-Bonds currently giving bullish signals, we would view any downside reversal in bonds (upside reversal in yields) as very bearish. These kinds of negative developments would alter our intermediate-term bullish outlook." After a 9% rally off of the August 10th low, the SPX appears to have put in at least a short-term top at the high of 8/25. From here our cycles call for a short-term low on 9/2 +/- 2 trading days, so the current pullback could last well into next week before the market resumes any rally. In our last update we warned that a drop in the McClellan Oscillator below -50 would be a very bearish development and would cast serious doubt on our near-term bullish scenario. As this weeks update is being written at mid-day Friday the breadth situation is deteriorating and the McClellan is at risk of dropping back below the zero line, which would be a worrisome development. (Ure has more on the McClellan below and you can check it during the day at: decisionpoint.com It was just below zero Friday at -1. - Ed.) This is especially so considering that it never made it decisively above the neutral zone (+50 to -50) during this recent rally phase. Also, while the recent bond rally has been impressive, the last two days have seen yields reverse and begin to creep higher again. If the 30 year bond were to return back to the 6%+ area, the bulls would likely be in serious trouble. So, while we are still holding out for new highs for the major indices in late September, in the end the market is the ultimate judge and we must remain flexible in case we are proven wrong. Even if our breadth and bond market thresholds, as mentioned above, are broken in the coming days, we would be very careful about buying into any September crash scenarios, as our cycle analysis argues strongly against any such occurance. One bearish outcome that appears more likely is that the current rally will take the form of a contracting triangle "B" wave, with the market whipsawing in a trading range created by 8/10 low and the 8/25 high. This type of "B" wave would catch both the "blow-off" bulls and the "crash" bears in a "meat grinder" market, full of false starts in both directions. If this "B" wave were to complete in the 9/27 +/- 3 trading day timeframe, the stage would then be set for a fairly spectacular crash or mini-crash type decline into our projected 10/19 +/- 3 trading day low point. In conclusion, while we are still holding out for new highs for the Nasdaq and the S&P to join the the recent new highs in the Dow, the bulls are dangerously close to losing any near-term upside momentum. If the McClellan closes below -50, and T-Bond yields climb back above 6%, then the chances of a blow-off rally into late September will be slim to none in our estimation. However, we would be similarly skeptical of any near-term crash scenarios. If a "meat grinder", trading range market is to be the result for the month of September, which we find increasingly likely, then the best place to be for the coming month could very well turn out to be cash. Such a trading range market would then be very likely to resolve to the downside in the month of October, making the post-expiration September timeframe a potentially ideal time for employing bearish strategies such as short-selling and put buying. For now we will be watching the action carefully and staying flexible."

To: Matthew L. Jones who wrote (24046)	8/28/1999 7:51:00 AM
From: Benkea	Read Replies (1) \| Respond to of 99985

More from Greenspan (the bottom is of special note): "As the value of assets and liabilities have risen relative to income, we have been confronted with the potential for our economies to exhibit larger and perhaps more abrupt responses to changes in factors affecting the balance sheets of households and businesses. As a result, our analytic tools are going to have to increasingly focus on changes in asset values and resulting balance sheet variations if we are to understand these important economic forces. At root, all asset values rest on perceptions of the future. Enough investors usually adopt strategies that take account of longer-run tendencies to foster the propensity for convergence toward equilibrium. But from time to time, this process has broken down as investors suffer an abrupt collapse of comprehension of, and confidence in, future economic events. It is almost as though, like a dam under mounting water pressure, confidence appears normal until the moment it is breached. Risk aversion in such an instance rises dramatically, and deliberate trading strategies are replaced by rising fear-induced disengagement. Yield spreads on relatively risky assets widen dramatically. In the more extreme manifestation, the inability to differentiate among degrees of risk drives trading strategies to ever-more-liquid instruments so investors can immediately reverse decisions at minimum cost should that be required. History tells us that sharp reversals in confidence happen abruptly, most often with little advance notice. These reversals can be self-reinforcing processes that can compress sizable adjustments into a very short time period. Panic market reactions are characterized by dramatic shifts in behavior to minimize short-term losses. Claims on far-distant future values are discounted to insignificance. What is so intriguing is that this type of behavior has characterized human interaction with little appreciable difference over the generations. Whether Dutch tulip bulbs or Russian equities, the market price patterns remain much the same. We can readily describe this process, but, to date, economists have been unable to anticipate sharp reversals in confidence. Collapsing confidence is generally described as a bursting bubble, an event incontrovertibly evident only in retrospect. To anticipate a bubble about to burst requires the forecast of a plunge in the prices of assets previously set by the judgments of millions of investors, many of whom are highly knowledgeable about the prospects for the specific companies that make up our broad stock price indexes. In conclusion, the issues that I have touched on this morning are of increasing importance for monetary policy. We no longer have the luxury to look primarily to the flow of goods and services, as conventionally estimated, when evaluating the macroeconomic environment in which monetary policy must function. There are important--but extremely difficult--questions surrounding the behavior of asset prices and the implications of this behavior for the decisions of households and businesses. Accordingly, we have little choice but to confront the challenges posed by these questions if we are to understand better the effect of changes in balance sheets on the economy and, hence, indirectly, on monetary policy." Other quotes: Greenspan said that although asset prices reflect “the economic process itself,” they sometimes move unpredictably. “History suggests that they also reflect waves of optimism and pessimism that can be touched by seemingly small exogenous events.” Greenie also said that earnings valuations have been distorted by changes in the economy. New technology coupled with gains in productivity and a bull stock market, are “accentuating” accounting difficulties that “tend to bias up reported earnings” of U.S. corporations. “One is the apparent overestimate of earnings that occurs as a result of the distortion in the accounting of stock options.” Failure to properly account for the changing value of options “serves to understate ongoing labor compensation charges against corporate earnings.” That has resulted in an overestimate of two percentage points a year in the growth of reported profits.

To: Matthew L. Jones who wrote (24046)	8/28/1999 9:34:00 AM
From: HairBall	Read Replies (1) \| Respond to of 99985

Matt: Well, Quote.Com's QCharts is what I use for intraday trading. Actually the price is for Qfeed with QCharts being included in the price. (No charge for upgrades that way.) Also, there are several secondary vender software products that will run along side QCharts and you can feed into Excel all on a single Qfeed. I don't use a secondary software vender or the excel link, but it is nice to have the option. The folks developing QCharts have improved the software with improved beta versions on almost a bi-monthly basis. They communicate regularly with users on the QCharts thread on SI and always try to accommodate request. Subject 21544 I use QCharts (I always upgrade to the latest beta version as soon as it is available) with real time on the NYSE, NASDAQ and AMEX with Level II for the NASDAQ. The number of symbols and or charts is not limited except by your computer's limitations and or data feed capabilities. All this is less than $140 per month. quote.com However in all fairness, I must note, I also use Window on Wall Street's Day Trader software as well. It is much more expensive for their data and for the software. It is my primary "end of day" charting software. It has scanning abilities for both technical and fundamental criteria. Also, one can develop and use one's own formulas, etc. I do not use WOW's data feed, but choose to use Dial Data with "end of day" data back to 1970. WOW Day Trader is a very good end of day program, but is lacking for intraday. QCharts is by far one of the best if not the overall best intraday software package out their and it is free with the data feed....the only problem is discovering all the features and learning how to use them for many folks. Hope this helps... Regards, LG