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Strategies & Market Trends : Stock Attack -- A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Lee Lichterman III who wrote (24074)	6/3/2000 1:58:00 PM
From: Lee Lichterman III	Read Replies (1) \| Respond to of 42787

Post #2 from our site Before I update the rest of the site, I thought I would write my thoughts that are spurred by things I saw on the charts first run and some good comments both here and on SI's Stock Attack thread by Haim, r edwards and Don among others. There is already a lot of talk about the high TRIN signaling distribution, the fact that the Bonds rallied hard on the economic data then faded as the day wore on and how the DOW gave up much of it's initial pop as the day wore on. These all gave me pause also but after mulling it all over for a while, I am now seeing this as bullish for techs though it is somewhat as Don would say, an anomaly, .... maybe. Let me explain and give a little recap of the set up. When the DOW dropped in January, the money fled to techs finishing off the speculative bubble where Tech was immune to higher interest rates and all that other nonsense. In March, the aggressive Fed finally managed to reel in the tech market and the large decline started. If you look at the charts, you can see that money was rotating from tech back into the DOW stocks as flight to safety began and the DOW recovered. The last few months, those that didn't get crushed under margin and had cash left as they were smart enough to get out of tech in time, moved their money into the "safe haven" sectors. Look at the Drugs, Healthcare, utilities etc. Dividend paying stocks, brick and mortar companies that actually make money etc became wanted again and even the speculative traders moved back into the R2K. Once these starting topping again ( except for the R2K ) This all set up the NASDAQ bounce as you could see the last few weeks that the Drugs, and Healthcare especially were forming large rounding tops as money started leaving quietly and heading back into tech land near the lows. I saw the rounding tops and money leaving but wasn't smart enough to figure out what it meant until last night when I thought about the high TRIN and saw some other charts and indicators. We have had a high TRIN on many of the latest rallies and yesterday took the cake with it staying in the 1.25 range most of the day. I will argue this is BULLISH for tech and here is why. The TRIN measures advance decline over Advance decline volume thus showing in the NYSE or OLD ECONOMY stocks, if they are being distributed or accumulated. They were being distributed heavily. No argument from me on that. Bonds also rallied on the favorable economic data and then faded all day showing that money was leaving bonds. One of the heaviest hit sectors to lose money in old economy was Drugs and Healthcare. SO why was all this money leaving and why???? Because it is now being seen as safe to get out of conservative, safe haven sectors, old economy stocks and Bonds and move back into techs. The VIX can easily drop to the low 20s or even dip slightly below it and since we are seen as making a low and heading up again, people are positioning themselves for those longs. Who was going to buy puts yesterday in the face of a good economic report and a super strong rally where advancing volume outpaced declining volume on techs 10 - 1?? Of course we had a low put/call ratio. Now is the water really safe to go into techs? Heck if I know. Personally I see irrational exuberance all over the place. I see stocks that are already higher than they were on a relative basic to the historical trading channels than they were back in March. I see FA that says we are so irrational now that it is sad yet comical. I still see higher interest rates at the end of a long term bull and a more questionable economic environment than at any other time in this cycle so I personally think everyone is nuts BUT....... money is heading into tech big time for all the reasons I just laid out. The signs are there. They may be right or they may be wrong but that is where it just went. How long will it continue? I don't know. As I said, this is irrational, many stocks are already over bought, over valued or just plain obscene and this could all prove to be a bear market rally but I wouldn't stand in front of the train until we see some signs of weakening. I think the real economy picture is questionable and I would keep loose stops here as you play along in the greater fool game so you don't get caught at the top all alone and with no other fools to pass your stuff onto. The time to tighten stops probably isn't that far off. I also wouldn't chase most of this stuff as I think a entrance will come in the next week and who knows, we may have some bad data this week to counter all that just happened but the psychology of the market is back in mania mode. No one wants, GM, DD, or any of those other over sold stocks now. They want C and AXP with all their bad credit risks to slum dwellers maxed out on credit card debt at obscene interest rates that will never get paid back. They want Chip makers despite us being near the end of the cycle that chips are KNOWN to have. They also want to forget about the accounting shenanigans done by the street favorites and over pay for them because someone else will buy it higher. FA is obsolete, Just pinch your nose, close your eyes and dip on the next pullback. For those that can't stomach it and want to short, FA will return someday, it is just a lousy timing vehicle. Good Luck, Lee