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

To: UnBelievable who wrote (53603)	6/9/2000 7:02:00 PM
From: pater tenebrarum	Read Replies (1) \| Respond to of 99985

U, i have no opinion on Monday or Tuesday...i don't play the short term ripples as some like to do. i used to day-trade the highly volatile i-nut stocks for a while, but have replaced this activity with a more relaxed approach. right now i'm more into positional plays, both long and short. essentially i like to buy what i can in good conscience identify as value, with usually predetermined price targets, buying and selling in thirds a la MB. i play the overall market using the index products and options... currently i'm on the lookout for shorting opportunities again. i think the market has perhaps a little more time to bounce around at higher levels, perhaps with a slight upward bias, and then we'll get the next major sell-off. i come to this conclusion due to the extremely high level of complacency evident in the options markets. if anything, the level of complacency is higher now than it was in early March, as not even index puts (normally mostly used for hedging purposes) find any takers. there may be more liquidity sloshing about that needs to be sucked in first(mutual fund liquidity has recently improved), but with every passing day things look more dicey to me... for very short term analysis i recommend reading Don Sews Index updates on the Stock Attack thread...he has developed a highly reliable system for short term trading purposes. he's probably in a better position to tell you what to expect for Monday and Tuesday. note that for Tuesday, both the probably cooked to perfection CPI and the Fed's beige book will be served up, traditionally reasons to rally the market. of course one can never entirely rule out that a negative surprise comes along, or alternatively that the market doesn't do much with a positive surprise, like today. last week's rally has restored some of the confidence in the credit markets, but the most recent observation on that front is that credit spreads have begun to widen in Europe as well. US spreads are still way above the panic levels seen during the Russian/LTCM crisis, and that amounts to a vote of no confidence for the financial system. obviously, default risk is seen as having increased markedly. notably, as soon as some liquidity seemed to return to credit markets, corporations rushed in with deals...all in the name of buying back stock and leveraging balance sheets even more. that's of course asking for it...imo the consequences of an economic slowdown haven't yet been thought through by most stock market participants. already default rates in junk bond land are at record levels, with the economy cooking on all cylinders. at the same time monetary condition are becoming more hostile, globally. the next big player likely to raise rates is the BoJ. it looks more and more like an interest rate bidding war of sorts. do stocks reflect any of this? hardly...after all, the refrain most commonly heard is that it's 1994 again. well, it ain't. i think the Fed is well aware that the deterioration of the current account must be stopped...and that the asset and credit bubble can't be allowed to embark on another leg of expansion. the only question is really if this realization is coming too late or not. regards, hb