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

To: Doo who wrote (36912)	1/6/2000 9:35:00 PM
From: Lee Lichterman III	Read Replies (1) \| Respond to of 99985

Thanks for commenting on the A/D. I was going to write a post before I look at my charts and change my mind but I couldn't wait and had to peak a little. I do want to throw out a possible scenario that LG alluded to also combined with questions about the utilities raised here the last few days and the DOW's rise. Anyone that had been reading my site the last few weeks should know I was looking for a rotation from the NASDAQ to the DOW for a long time. I am actually starting to get bullish here as I see some things setting up that look good. (You know me, always the contrarian. Bullish during drops and bearish during the rallies as I look ahead <ggg>> As the top was setting in on the NASDAQ, we had a collapse in the bonds and then as the NASDAQ started dropping, the bonds started recovering slightly, and utilities peaked up over their declining lines. A few days before all this, the AUX ( Auto makers index ) broke above a long term resistance line, base metals started moving up etc giving an advance warning that the rotation was about to begin. This is now fairly obvious but now we see questions showing up as to why the banks are bouncing. If you look at the utilities and the bond rate up already discounting a couple Fed rate hikes, I have to wonder if the opposite may be true. The Bonds collapse may have originally been a reaction to the Fed's printing money hand over fist but now that the Fed is taking it back as expected and some of the inflationary reports are acting better ( Jobless claims rising, housing starts down etc) The bond may have been shaking out the last of the weak hands, taking out the TA traders who were watching that long term support line and the "smart" money "in the know crowd" are now about to start buying the bond again. Other "smart money" knowing this are jumping to the interest rate sensitive issues like Banks, utilities etc to get in first before the action becomes obvious. Also the rotation to more value oriented plays is actually healthy and instead of a total market meltdown, we could remotely possibly, ever hopeful, have a return to more realistic levels as techs are dumped and companies that actually do something for the economy start to take the lead as evidenced by the A/D and NYSE new lows dipping below 100 for the first time in Months if not the year. As far as no fear, you are correct, I found myself tempted to dip myself the last couple days but just walked away although I think we are due for at least a small one soon as does the phantom trader who wishes to remain anonymous. <ggg> The reason I mention this is while the high flyers have come down 10-20% in some cases and many are proclaiming that they are now over sold and absolute must buys, I am also seeing the same thing I saw in April 98 when some sectors sold off in the background while the market was still rising. That is basically the CPWRs in sympathy with BMCS and many other stocks I track are dropping 40-50% on no bad news but either on worries of bad earnings or sympathy for other stocks within the sectors. With all this going on, stocks that have actually already warned like IBM and GTW are going higher based on them getting better in the future. These stocks grew earnings in single or low double digits yet the stock prices in some cases like GTW have doubled or tripled this year. Too much complacency so there should be more selling down the road in the NASDAQ. I read a poster over on the EMC thread that is still looking for QCOM to double despite it trading at 140 a share on a book value of a little over $4. Even if they doubled revenues and earnings, that is over 5 years of perfect economy and no competition valuation using current price and over 10 years if it doubles. Yep, we still need more selling. Don't get me wrong, I think the economy is still healthy and as heinz has stated, we may be in more of a risk for recession than inflation so we may not get all the rate hikes the talking heads are talking about which is why the Bonds may recover soon and the utilities and other dividend paying stocks are trying to bounce. Only time will tell. Now I will look at the rest of my charts and realize I am totally out to lunch. This is still just a theory but totally feasible I think. Good Luck, Lee