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

To: Lee Lichterman III who wrote (34744)	12/5/1999 2:19:00 AM
From: Lee Lichterman III	Read Replies (1) \| Respond to of 99985

Well I ran through most of my stuff and was amazed that Friday was up so huge in the indexes. Almost every chart I ran through of about 700 opened high and sank the rest of the day. There was some tape doctoring with trades at low levels most of the afternoon then the last trade or afterhours trades were up large to make the day appear positive and most were on small trades of only 100 shares. Example, GTW 69 3/16 all the way into the close then 15 minutes after the close one 100 share trade at 72 1/16. Huh???) Also most stocks that were up were not up much except for the usual suspects CSCO, SUNW, EMC etc. Many stocks were up 1/4 to 1/2 point although most as I said opened much higher then spent the rest of the day dropping. Charts that looked good on the daily charts as I looked at the hourly charts noticed that most have formed lower highs and lower lows over the last few days. What does it all mean? Despite the fact that many of the darling stocks are still climbing and some other "good" stocks have good daily charts, the odds of a "NEW" long trade here are not good. However I would be even more careful shorting this mania knowing the Fed is injecting liquidity at a record pace. I firmly believe flat is the safest unless you are very very careful in what you are buying or shorting. Are many stocks too high, you bet. If I were already in them would I sell? NO!!! I would have close stops and babysit them religiously though. I see many stocks approaching double tops, forming bearish wedges, bullish flags etc but they are all basically at some sort of decision point. Don't get me wrong, I do believe that the darling stocks are good companies with great potential but the astronomical levels they are trading at are ridiculous. Stocks historically trade at 10-15 PE ratios on same year earnings. When that got out of hand, the market started quoting next year earnings as the norm for PE ratios, now that we are off the high end on that scale, I have recently noticed articles quoting PE ratios based on 2002 and 2003 earnings. GIVE ME A BREAK! In the last 2 years we have gone from a everything is perfect environment to an Asian contagion that was going to push the world into recession (and it did kill earnings for many ) and now we are over heating and staglating at the same time ( Notice how many comapanies missed or had to drop estimates including many of the darlings?). How can we claim to forecast 2003 earnings? We could have chips implanted in our brains by then and daytrade by blinking our eyelids or something. Think about the computer you had during the 1998 new year and now look at what you are on now. I know mine is 3 times as fast with more memory than I had available on my hard drive then. <ng> I might start a comapany in my garage that will beam internet signals through a type of router that doesn't even exist now and make QCOM, CSCO and SUNW obsolete. Before you laugh, what did Bill Gates do, DELL, SUNW, etc? OF course I am a moron so it won't be me but somewhere right now there are a thousand kids out there that know computers and softwae code better than many of the best minds of silicon Valley working on a "project" that could unseat any of the giants. MSFT used to buy these guys out and squash the ideas so they wouldn't interfere. No matter what the Fed does in the MSFT case, you can bet they will be watched closely to stop that old practice. I have ranted enough, basically valuations are way too high, risk is even higher and the market is approaching make or break levels ON STOCKS NOT INDEXES. I do think the powers that be will do their best to make the indexes make new highs before the end of the year but Friday just goes to show that moving a few key stocks up can do big things on the indexes. I firmly believe this is a time to be cautious, avoid new trades and maybe start setting straddles as the week progresses. Fundamentally I have to believe we will start retracing as the FOMC meeting draws closer and since economic data starts coming out Wednesday, that may be a good day to have them set locking in profits each day and resetting new ones before the close for the next day's release. Good Luck, Lee