Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : The Naked Truth - Big Kahuna a Myth -- Ignore unavailable to you. Want to Upgrade?

To: re3 who wrote (81939)	1/2/2000 1:13:00 PM
From: RJL	Respond to of 86076

Interesting article from Barrons this weekend: interactive.wsj.com ----------------- Sell Signal? A seer who called the bottom now sees a top By Daniel Turov She was 21-beautiful, intelligent, charming -- and she said, "Yes," to my marriage proposal. I was as ecstatic as humanly possible. She was 42. She had been my wife for 21 years. I loved her dearly, and I was burying her after a two-year bout with cancer. I was as despondent as humanly possible. Understanding that human emotions have maximum limitations is the key to understanding the stock market. When fear-based misery reaches that level, selling stops and bear markets end. When greed-based ecstasy reaches its maximum, bull markets top out. So, can one measure these emotional excesses and use them to time the market? Yes. I recognized that a quarter-century ago, when I penned an article that Barron's, under the headline "Buy Signal" published on December 9, 1974, the very day the Dow Industrials hit their bear market bottom of 575. My thesis was that a valuable day-trading tool (the Short Term Trading Index, or TRIN, which takes into account stock-price advances and declines and trading volume) could provide a longer-term measure of one type of emotional excess, and that it was saying that the market's years of misery had exhausted the investing public's bearish sentiment. A bull market probably was about to dawn. Since then, far more sophisticated indicators have been developed, by me and by others, which measure human emotional excesses and their probable effects on the market. These emotion-based indicators, when used in conjunction with one another, have been helpful predictors of short-term market trends. At the most extreme levels of ecstasy and despondency, people unwittingly give up control of their money. When this happens, the market moves violently in the direction of the extant trend and then reverses direction dramatically -- precisely what's evident now. In 1929, traders leveraged themselves to the hilt. When investors' ebullience wavered, involuntary massive liquidations, via margin calls, doomed the market. The key point is that the sellers had no choice; they were forced to sell. They'd given up control of their money. In 1987, institutional investors, who had bought far more than was prudent, complacently thought that programmed stops would provide a safety net -- without ever considering that the door was too small for everyone to exit at once. Again, the sellers had no choice; they were forced to sell because they had given up decision making control to pre-programmed orders. In 1929, the emotional climax's final mania began about four months before the crash; in 1987, about two months before. In 1999, the final mania appears to have begun about November 1. So what will be the catalyst this time for the reversal? Most likely, monetary tightening will be one element. Whatever the cause, it's important to repeat that bull markets that reach a maniacal range (such as we're close to) end with forced selling. So how will this forced selling be manifested this time? The Baby Boomers' mantra of investing for the long term has caused them to buy stocks and fund shares regularly month after month, regardless of what the market does. If they start feeling overextended the next time the market pulls back -- and my research shows they will their caution could force fund managers to involuntarily liquidate stocks. With mutual-fund cash levels near record lows, this could trigger a type of programmed selling that would start slowly but ultimately would turn into a cascade. In fact, the market could top as early as this month. Depending on the precise nature of the first leg of the selloff, we could see a pretty good reflex rally in 2000's second half. But by next year, the selling will likely get rather nasty. ----------------------- And a good post from the millenium thread: Message 12438675