To: IQBAL LATIF who wrote (30489 ) 1/19/2000 12:05:00 PM From: IQBAL LATIF Respond to
<<Positive breadth was accompanied by decent upside volume and good tape action on the part of the major stock indexes on Friday. This is options expiration week and a dose of volatility can be expected just about anytime, especially mid-week (tomorrow?) as one of my short-term cycle 'change points' come into play. It is interesting to note that the Dow Industrials touched the 11,900 area on the intra-day theoretical high which was my upside objective for this current rally. The question, of course, is whether the 'cash' index will equal that performance today or tomorrow. With foreign markets doing well on the Martin Luther King holiday, chances are decent the rally still has some life left in it. As you know, much of the rally in the Dow Industrials on Friday was attributed to the strength in Intel (INTC) which has catapulted itself into the stratosphere when a few short weeks ago it was a 'dog'. Volume is very positive, but the stock is also quite extended and vulnerable for a pullback into the 80s or low 90s. It also has a shot of seeing 116 first. Should be interesting. Besides INTC, there were only handful of Dow Industrial stocks participating to the upside on Friday, but I guess we have to be grateful for the rotation in the Dow Industrials. For example, Disney (DIS) which was strong earlier in the week now looks lower. We went short DIS on Friday. Overall, the market looks like it could trade a bit higher here, but a trading top should be forming in this timeframe. There was a very interesting article in the L.A. Times over the weekend comparing the current period of time in the marketplace to 1929, as well as looking back at the action of the Federal Reserve then and now. The similarities are quite striking and need to be taken seriously. According to the article, the 'trigger' for a huge market collapse would be a substantial increase in interest rates, e.g., a point rather than a quarter-point (which was the case in August, 1929 weeks before the October crash). The difference this time is that Greenspan probably reads the chronicles of the Federal Reserve in the 1920s and is not likely to duplicate the same mistake again. I would point out, however, that Greenspan was at the helm prior to the Crash of 1987 and was partially if not totally responsible for allowing the credit crunch that preceded and probably led to that event. With the upcoming Fed meeting in February and the likelihood that Greenspan will raise rates (however slightly), it makes sense that the bond market will make little or no upside progress. The bonds are down and interest rates are headed higher and nothing has happened to change that fact yet. Bearish sentiment has been correct and its obvious the increase in rates has had little affect on stock prices. One day (perhaps soon) that will change.
