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

To: Vitalsigns who wrote (50811)	5/15/2000 6:32:00 PM
From: pater tenebrarum	Respond to of 99985

you're preaching to the choir...i share your doubts and reservations. i think the stock market is probably a very bad long term bet right now...the recent rise in rates suggests that a period of correcting various excesses lies ahead. leverage in the economy is more or less the highest it's ever been relative to GDP, and the question is imo not so much if that will be corrected, but when. but that doesn't preclude the possibility of a short term rally. the Consensus Inc. bullish consensus fell to 21% last week, and absent a crisis that's been a pretty good indicator that a short term bottom was near in the past. what's more, in a full-blown investment mania, no reason is needed to rally. all that is needed is liquidity. we have recently had a pretty lively debate on this thread whether there is or isn't enough liquidity out there. last week trimtabs reported that the mutual fund cash-to-assets ratio had fallen to an all time low of 3,8%. that suggests that rallies will likely be rather short lived, unless inflows pick up dramatically. your observation on volume is duly noted...as long as you're on the right side of the game it doesn't matter much however. it is possible that many players were simply dissuaded from playing as a result of the mid-April swoon in the Nasdaq. i have heard about the untimely demise of China's forex trading head...very strange. China has been in the throes of deflation for 30 months running now. the official data suggest the economy is growing, but unfortunately these are the most untrustworthy data imaginable. the price deflation infers that the Chinese economy is actually shrinking. the Chinese banking system is easily the worst in the whole world, except maybe that of Uzbekistan and the Ukraine. it's definitely in worse shape than Japan's, and that's saying something. the banks have for years been forced by the Chinese government to finance essentially bankrupt state industries, to such an extent that about 60% of the loans on their books are in all likelihood complete duds that will never be repaid. China is in many ways good for nasty surprises imo. the current regime is going to do whatever it takes to remain in power, and since China is not as cohesive a state as is wrongly assumed in the West, that may well include drastic measures at some point. `let's call it a potential left-of-field upset to the happy state of affairs that generally pertains in the world at large right now. regards, hb