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

To: Les H who wrote (33790)	11/19/1999 5:13:00 PM
From: Les H	Read Replies (1) \| Respond to of 99985

TALK FROM TRENCHES: VALLEY OF DOOM OR LAND OF MILK AND HONEY? economeister.com By Isobel Kennedy NEW YORK (MktNews) - U.S. Treasuries are weaker for the fourth day in a row. Players have been clearly spooked since the FOMC raised rates this past Tuesday. Unfortunately, they will find no further direction from economic indicators or Fed speakers until early next week. Economic releases and their impact on inflation are the keys to the market right now, sources say. Next week Oct durable goods, BTM/Schroder Retail Index, Redbook Retail Index, 3Q GDP revision, November University of Michigan, and Oct Personal Income and Spending are due out next week. The Fed blackout period theoretically ends on Nov 24. Cleveland Fed President Jordan, a non-voter and a hawk, is speaking on the global markets in Australia on that day. Will he shed any light on U.S. monetary policy? Future speaking engagements for other Fed officials will be available later today. In the meantime, some dealers put a very bearish spin on yesterday's minutes of the Oct 5 FOMC. One important shop now says 3Q real GDP may be revised up by 0.3 pt to 5.1%, and also adds the FOMC minutes indicate this round of Fed tightening "is open ended" and could last a while. Some analysts say the Oct 5 minutes noted that core producer prices at the early stages of processing "had firmed noticeably" (a reference to higher ex-food and energy intermediate PPI at +0.4% in Oct) but that the YOY change in AHE was modest. AHE were +3.6% YOY in Oct vs +3.6% YOY as of Oct 1998 -- no movement. If costs are rising for materials but not for wages in an environment of increased productivity, perhaps inflation can be contained? And there are some out there who see no reason for further tightening from the Fed at this point because they see inflation under control. But they, too, will be scrutinizing every piece of data and every ounce of Fedspeak that drips out. Keep in mind that next week is Thanksgiving week, which marks the kick-off of the 1999 holiday spending season. One strategist says given the Federal Reserve's emphasis on consumer demand and employment, the weekly retail sales over the subsequent month should be important. As far as the market is concerned, many seasoned players continue to express confusion over the state of things. One summed it up by saying, "One day things are great and the next day things are terrible." But they all seem to agree that this has been a trader's market not an investor's market. And the investors know this, one salesperson added. "They have been through this before. They know when to step aside and let the 'big boys' battle it out." Another salesperson laments by asking what do we have post FOMC? 1) Treasuries down for a 4th day in row; 2) markets dominated by large global deals; 3) more rate hike fears (50 bps expected) due to FOMC text; 4) bearish sentiment vs pre FOMC-optimism; 6) stock market rally lead by techs; 6) directional traders left to search for direction. And what's a person to do? "Wait for direction!" he says. "He who had led us into the Valley of Doom must lead us back to the Land of Milk and Honey! Go Alan." But it is doubtful that Uncle Al will be pleased at the performances of the defiant equity markets since his rate hike this week. The Dow Jones is up about 300 points since Tuesday's meeting. Last night it closed above the 11,000 level for the first time since Sept 13. And it is now within spitting distance of the August 25 record high close of 11,326. From time to time, we have mentioned the "Norton Rule" of trading. Dave Norton was a heavy hitting trader from Texas who said that no market goes the same direction for more than 7 days in a row. In the past 30 years, sources say this rule has been broken in only about 15 cases. Interestingly, the Nasdaq closed higher 8 days in a row from Oct 28 through Nov 8. The Hong Kong Hang Seng rose 9 days in a row as of last night's close. And the French CAC 40 rose 12 days in a row from late Oct to mid Nov. More head scratchers atop all the others for 1999. Japan's second extra budget and a shortfall in tax revenue will lead to an extra Y7.5 trillion ($70.75 billion) in bond issuance next year, which will come through short- and mid-term issues to avoid a spike in long-term rates, Japan Finance Minister Miyazawa said. Has Japan done enough to cope with Y2K? Not nearly enough, according to an article in the London Times on Friday. Recent reports suggest Japan is woefully behind in the race to beat the Bug. Japan ranks behind Hungary, Chile and Thailand in the "preparedness index" published by Warburg Dillon Read. However, the Times concedes that accurate information about the level of preparedness is hard to find. Such stories may add to jitters concerning Japanese assets which have been fueled by rumors, which have not been entirely scotched, that Japanese sovereign debt could be placed on review by Moody's for a possible downgrade. San Francisco Fed President Parry echoed New York Fed President William McDonough, saying the Fed is fully prepared for Y2K and is confident about liquidity. Parry also reportedly said there would not be a significant economic impact from Y2K. Except, of course, if people don't withdraw all their cash from the bank and put it under the mattress for safekeeping. Or if they don't take the emergency cash and fritter it away if no emergency occurs. And if the typical American, who spends like crazy during the holidays anyway, doesn't go overboard this season with Y2K extravagances in stock wealth affect mentality. Quiet Friday conditions often give rise to the circulation of silly trivia. None the less, here is something to ponder: Today, 11/19/1999, will be the last day that has all odd digits in its date until 1/1/3111! We have seen the last "Odd-Digit Day" in our lifetime and for about 37 more generations to come, one source reports. And 1/1/2001 does not count because 2 is an even digit! --Rob Ramos, Joe Plocek and Tom Borroughs contributed. NOTE: Talk From the Trenches is a daily compendium of chatter from Treasury trading rooms offered as a gauge of the mood in the financial markets. It is not hard, verified news.