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

To: donald sew who wrote (32095)	11/2/1999 11:12:00 AM
From: MonsieurGonzo	Read Replies (3) \| Respond to of 99985

Donald:" Little Fishes " >EXTREME SECTOR ROTATION... ...indeed! If there is an "earnings churnings" during that season every quarter, then certainly one outstanding characteristic of year 1999 is a market "crabbing" along sideways, driven by isolated sector movements. The implication (of this YTD market environment) is that: we're asking the wrong question, folks... it's not "MDA - MARKET DIRECTION ANALYSIS ?" but, "SDA - SECTOR DIRECTION ANALYSIS ?". >A/D Line, New Highs/Lows, and BigCap/SmallCap Divergence... ...in truth, all I care about is the BigCap bellwethers but, I've always found your interpretations of these traditional T/A indicators to be interesting, Don. Let's chew this topic. >Im a believer that the overall market turned bearish in APRIL 1998 which is over 1.5 year ago, and during this period the DOW/SPX/NAZ did set new highs... ...that is what these measures indicate, no question about it, Don. If we owned all the stocks, our net equity would be in a state of decay, not growth. If we accept these measures, the conclusion they imply: then, where is the "asset bubble" ? a bit of a paradox, that. So, let's not question the data, rather - let's look at the measures. What if, instead of calculating the A/D, NewHighs/Lows, etc. for the entire market, what if we calculate these measures for only the (sum of) BigCap bellwethers of each SECTOR -? Now, that gives us much more useful measure = indicator of "Market Direction", indeed. IOW, I propose an acute, "capitalization-weighted" measure of A/D, NewHighs/Lows, etc. I don't see "value" in all these low-P/E "little fish". And the reason may be this: If there is "a new economy" Then many of the "little fish" are no longer relevant to it. To be sure, new "little fish" like DOT.COM's are having no trouble whatsoever with liquidity {grin} in fact, just the opposite, perhaps. What these traditional A/D, NewHighs/Lows measures may really be telling us, Don, is that we are experiencing a fundamental change, characterized by a shifting of kapital investments - perhaps from brick-and-mortar to point-and-click? As soon as some "little fish" becomes a DOT.COM fish, voila ! ===> I believe the data, and do not question your conclusions, Don. My points are: (1) if the environment is "sector rotation", then the MARKET is going sideways; and the question is, "SECTOR DIRECTION ANALYSIS". (2) if the economy is "new", then many "little fish" are irrelevant; and the A/D, NewHighs/Lows of BigCapBellwethers is a more useful T/A indicator of market direction. -Steve