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

To: HairBall who wrote (29361)	10/13/1999 12:54:00 PM
From: OX	Read Replies (1) \| Respond to of 99985

OT: hey LG... surely that was off-topic... play by the rules <vbg>

To: HairBall who wrote (29361)	10/13/1999 1:29:00 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 99985

inflation watch: long bond 6.28% This is the number to watch. I don't think it's an exaggeration to say that, for the next 6 months, everything else is noise in the signal. I'm going to ignore the gurus, ignore the day-to-day fluctuations in market sentiment. I'm even going to ignore earnings. Earnings, overall, will be good, everyone expects this, and it's in the stocks. An Intel or Xerox missing is a gift to the bears, but as long as interest rates go up, even beating expectations will only cause brief rallies that end abruptly when Mr. Market goes back on inflation watch. It looked, briefly, like the Nasdaq 100 might have another leg up, when QQQ broke above 128. But Intel has driven a stake through the heart of the big cap techs. Yes, they can be killed. After learning this, the next lesson the buy-on-the-dippers need to learn is that the big cap techs don't always rise (quickly) from the dead. The recent all-time high on QQQ was just a head fake. These kind of things, where a stock or index breaks out of a trading range, looks like it's beginning a big move, and then slides back into the range, makes it very hard to trade short-term. By the time you know that the trading range is definitely broken, most of the move has been made. If you place too-tight stop-loss orders, you get out at exactly the wrong time. It seems to me that the safest way to play trading ranges is to decide what the range is, and also decide what direction the stock will move when it breaks out of the trading range. Then, only play the range in one direction. So, since I think QQQ will break down when it leaves its 118-127 range, I buy puts at 126, hold them and ride it out if the index goes above 126, and sell some of them beginning at 119. "Safe", of course, is a relative term. The options have to be long-term enough so there is time to be wrong for a while.