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

To: bobby beara who wrote (40943)	2/22/2000 10:33:00 AM
From: Kailash	Respond to of 99985

All right, precisely my sentiment. If we're going down, the failed rally at the open is a perfect indicator. Because of the split market, the Nasdaq could have a sizable correction towards the October values, which is where the divergence really took off. We'll see! Csco and qcom are doing their bit so far. siliconinvestor.com K

To: bobby beara who wrote (40943)	2/22/2000 10:34:00 AM
From: HairBall	Respond to of 99985

bobby beara: This split market is very confusing. I am sure the magnitude of the distribution/rotation required it to be staged. This has lead to a staggered top and decline... Of course all IMO... Regards, LG Disclaimer: The above is my opinion only and I reserve the right to be wrong. An overall market expectation is just that and should not be used in exclusion of the evaluation of individual equities or other investment instruments. Do not base any investment decision solely on any one person's views or analysis. Do your own research and take responsibility for your investment decisions.

To: bobby beara who wrote (40943)	2/22/2000 10:49:00 AM
From: Crimson Ghost	Read Replies (1) \| Respond to of 99985

Don't fight the Fed: From Morgan Stanley Global: On Fighting Central Banks Stephen Roach (New York) Even in the New Economy, it may still pay to heed old rules. For investors, one of the oldest is, "Don?t fight the Fed." Whether or not that adage can be amended to include the ECB is an open question. But it?s increasingly clear to me that two of the world?s major central banks are on a tightening path that poses considerable risks to ever-complacent investors. There are five key dimensions of central bank risk that I believe will bear most critically on world financial markets in 2000. The first is an important tactical shift in the approach to monetary policy. The central bank tightening of 1999 was all about "normalization" -- returning policy settings to the pre-crisis norms that prevailed in early 1997. While the Fed and the ECB have succeeded in normalizing nominal short-term rates, they have not accomplished this objective from the standpoint of real interest rates. That?s because there has been an oil shock that has boosted headline inflation about 0.5 percentage point above pre-crisis norms. In other words, real interest rate normalization requires more tightening than nominal interest rate normalization; while G-2 central banks have accomplished the latter, they have not achieved the former. But there?s more driving central banks in 2000 than policy normalization. A second dimension of policy risk is the coming transition to a more classic counter-cyclical monetary tightening. That?s especially the case in a fully-employed US economy, where the Fed is now going out of its way to state quite explicitly that GDP growth is far too fast. The US central bank has made this statement in the context of a significant upward revision to traditional macro speed limits; old economy speed limits were thought to be around 2.25%, whereas new economy limits are believed to be in the 3% zone. For a US economy that has been on a 4.2% growth path for nearly five years, and 6% over the past two quarters, enough is enough. The Fed wants a slowdown. And, by the way, to the extent that America?s growth dynamic has been increasingly tech-led, it seems reasonable to believe that this sector will bear the brunt of the ensuing downshift. A third element of central bank risk is the time-honored credibility issue. As Ottmar Issing of the ECB once said to me, "...all we central banks have is our credibility." That credibility is now under attack. There?s the "moral hazard play" in the United States, where many believe that the Fed is trapped in the context of an equity market that has become too big too fail. And there?s the ECB?s own dilemma, with a sagging currency symbolic of a new wave of politically induced euro-skepticism; in that same vein, Joachim Fels has also made the point that the ECB may simply believe that its policy rates are too low to effectively manage the Euroland economy. There?s only one way to regain the upper hand on the credibility front -- more aggressive tightening than financial markets are expecting. A fourth consideration is the ever-present 500 pound gorilla -- over-valued equity markets. This is obviously a very big issue for the Fed and a lesser one (but growing) for the ECB. Alan Greenspan has recast this issue completely since he first opined over "irrational exuberance" in December 1996 (at Dow 6437). In last week?s Humphrey Hawkins testimony to the Congress, he was quite explicit in equating the US economy?s growth excess to the wealth effect: By his reckoning, it was roughly equivalent to one percentage point of extra GDP growth. The fact that this excess is thought to be largely stock-market-induced is hardly idle conjecture. Nor does it matter that stock market strength is narrow or broad. The US central bank has been very deliberate in expanding its explanation of what drives the real economy -- adding an increasingly powerful wealth effect to traditional income effects. The Fed, in my view, is sending an increasingly clear signal that a macro growth excess -- irrespective of its source -- must now be eliminated. While this need not be interpreted as a strategy of explicit equity-market targeting, it could well be tantamount to a strategy of implicit equity market targeting. Fifth, is incrementalism. Neither the Fed nor the ECB seem likely to make large interest-rate adjustments at upcoming policy meetings. With core inflation still low, they have the luxury of sticking to 25 bp tightening dosages. Moreover, with real economies more and more dependent on financial markets, the possibility of destabilizing, asymmetrical wealth effects cannot be ruled out if equity markets finally correct. Incrementalism allows central banks the luxury of backtracking should their policy actions prove too disruptive. That, of course, would underscore the ultimate moral hazard dilemma all the more. My own guess is that G-2 central banks would welcome an "orderly" correction in over-valued equity markets. Maintaining an incremental approach to tightening would enable the authorities to tough out the inevitable aftershocks. There is an over-arching theme to all of the above. In the depths of the financial crisis (late 1998), central banks eased aggressively in order to save the world. In doing so, they essentially abdicated control over their real economies and financial markets. Global healing was a signal that policy normalization was in order. But now as the world moves beyond healing, it is imperative for central banks to act in order to regain control. The longer they wait, the tougher that task will be. The risk is that short-term interest rates in both the United States and Europe may have to rise a good deal more than the 50 to 75 bps that financial markets (and our US and Euroland economists) expect. New Economy or not, some things never change. Don?t fight central banks.

To: bobby beara who wrote (40943)	2/22/2000 12:44:00 PM
From: Cynic 2005	Read Replies (2) \| Respond to of 99985

Bobby, have you updated your AOL-RCA chart recently? I am curious to see how it looks now.

To: bobby beara who wrote (40943)	2/22/2000 1:01:00 PM
From: Saulamanca	Respond to of 99985

Reaction low from closing the gap on Gilligan`s Island at 4291 held. Right now we`re stuck between that low and the declining bottoms trendline from the Gilligan Island lows on 2/8, 2/9 and 2/14. 207.61.23.98 --Jim

To: bobby beara who wrote (40943)	2/23/2000 12:29:00 AM
From: Rarebird	Respond to of 99985

<This split market is very confusing.> There are explanations but you are still to fundamentally oriented to accept them. Investors are clearly paying up for some of the high techs in anticipation of future earnings growth. It is easy to refer to this buying as "greed" or "emotion"( like Heinz does) especially when it makes no sense to you. The only way to make this split market unconfusing is to accept New ERA to a point. One does not have to agree with it to see its influence and power in today's market. ( Personally, I don't think it is going away so quickly until a recession comes.) Otherwise, one becomes a Clown or Preacher laying out a doomsday scenario based on history. I know all the Bearish arguments concerning Valuation. Tell that to all the Tom, Dick, and Harry's who enter the work force and who have 20% of their pay check ticketed for the equity market. I haven't bought into any New Era philosophy. I've become pragmatic. That's all. Money inflows talk. The rest is BS. Sometimes it takes some depth to get a little superficial and unsophisticated and just look and see what is going on here.