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Strategies & Market Trends : Options -- Ignore unavailable to you. Want to Upgrade?

To: steve mamus who wrote (3715)	2/26/2000 6:15:00 PM
From: cthruu	Respond to of 8096

Hi Steve: I do not have a "pricing model" or such esoteric thing. As a momentum and trend trader, I look at individual issues in strong sectors for long or weak sectors for shorts. I look for technical signals and pay some attention to fundamentals - not much for short term trades. Of course, general market conditions are important and I have them in the back of my mind at all times - I am holding about 40% cash in my total portfolio at this time. 20% in funds and 15-20% in stocks or long term holds. The rest is options trading capital. Percentage changes as the trading capital changes. As far as DOW goes, I have a theory that the divergence is because the institutions are dumping DOW stocks for technology stocks. You can not have 30-100 point swings over a short period if the institutions are not playing. Remember in 1998-1999 when there was a large divergence between the indices and advance/decline lines? The market Gurus kept on saying that this situation can not go on for long and they were dead wrong. My theory was that the institutions were dumping losers for leaders - and the leaders kept on going regardless of the divergences. I believe it still holds true. Greenspan has limited effect on the market in this environment. Productivity is at all time high, inflation is non-existent and unemployment is at all time low. This holds true even for third world countries - look at India where inflation has come down from 16% to 2.6% and bond yields are plummating. Asia is not about to crash soon, Europe is on a roll and we do not have a major crisis looming on the horizon. China is posturing because it wants to join WTO. All this because of technology advances.I feel very good about the economy and its prospects for next several years. So I am not afraid of these divergences. When the DOW bottoms- I think around 9710-9725 - the institutions will rotate from techs to DOW stocks. There is only finite amount of money going around and the sectors must rotate. At that time, I will be looking for shorts in weaker tech stocks or long positions in stronger DOW stocks like MER. I think the leaders will keep on going higher when DOW bottoms. Just my uninformed opinion. Regards: GP