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

To: X Y Zebra who wrote (7459)	11/18/2000 6:54:54 PM
From: Poet	Read Replies (1) \| Respond to of 10876

Yow! I can't wait till Vood, TLC ,JXM, et al get a hold of this post. Keep it up and I may stop daytrading index options. <g> Thank you for the grist for our mill. Poet, speechless in Ct.

To: X Y Zebra who wrote (7459)	11/18/2000 9:55:48 PM
From: dli	Read Replies (2) \| Respond to of 10876

Tazio, a few thoughts on some of the points you make in your post. 1. While I use T/A [a.k.a. Voodoo], I am not a "purist” we don not live in a vacuum. I consider that outside events can overrule the T/A credo. 2. Hence I combine T/A with the psychological effect that events can have on markets... This is circular reasoning. TA is based on the assumption that "outside events" as well as sentiment ("psychological effects" as you refer to it) is reflected in market prices. So there is no use in gauging them separately and doing so would be double counting and may lead to wrong conclusions. Here I would say that a short-term rally would be possible simply to return to the "averages", particularly that of the bollinger bands. I believe that we've already seen such a technical reaction and are now on a new leg down where the first target is a test of the recent lows. You can see that very clearly on the daily NDX chart where the recent pullback found resistance at the 20EMA as expected confirming the downtrend. I tend to follow the NDX instead of the COMPX because the NDX is what is actually traded and I've found technical signals on it to be clearer and more reliable than on the COMPX. The question now is if we can make a higher low. If so then there's a chance that we may be able to develop a new trading range in the NDX 2800-3200 area. While a resolution to the election process may spark a short relief rally I don't see us making a run at old highs anytime soon. I think that considering the tremendous technical damage that has been done it will take an extensive period of base building before there's any sustained move to the upside. So although all what I have indicated shows clearly we are continuing on the way down [...] why am I considering a possible change of direction? A= Because I can not find a strong enough reason to see the "logic" behind a continued downward trend from a more fundamental perspective. NOT the technical side. i.e. Other than the extreme valuation of some companies, nothing has changed: (and consider that such extreme valuations are no longer). 1. I continue to believe that the wiring of the Internet infrastructure, not only in the USA but worldwide continues "on schedule". True that the .bomb now gone mania created a level that as we have seen it was not sustainable. In part, this is were the unraveling began. Those excessive valuations are still very much alive despite the recent beatings many of the highfliers took as stocks like BRCD, JNPR, BRCD, SEBL, BEAS, CIEN, BRCM etc. are still pricing in earnings growth rates that are clearly unsustainable. Especially if you take into account that we are now experiencing deceleration in earnings growth which will put further pressure on multiples. And there haven't even been any number cuts yet for those companies. That's going to be the next shoe to drop. I believe that we may well be entering a period again where people are not willing to pay up as much for growth anymore as they were during the past two years. 2. In spite of the spike of oil prices, it is very possible that there will be a glut of oil in the coming years. Why ? Because although I have been surprised at how well the OPEC circus has been able to behave itself, I doubt that when demand for oil slacks a bit, (and I believe it will), the oil ministers and sheiks will not react accordingly, particularly when their treasuries will need the $$$$. Even then, it appears that inflation seems under controlled. I believe that the spiral in oil prices was the result of manipulation by these ministers and sheiks given that they have curtailed production. Not exactly a free market is it ? --Open the Alaskan north slope for production and watch what happens to the carefully crafted (read manipulated) current oil price. It is my understanding that the rise in oil prices is not as much a function of limited supply of crude as it is function of bottlenecks in the refinery and transportation system. During the days of cheap oil there was simply no incentive to invest into infrastructure (new tankers, additional refinery capacity) and now we are paying the price. [...] Which brings this soapbox drama to its punch line and conclusion... the only thing that it is keeping the current market environment of such indecisiveness is the election Charade... Remove that and all of what I said about T/A in regard to the mentioned indicators could reverse, indeed in a rather abrupt way, simply because a relief rally would be of such magnitude, that it would then put in place the necessary changes in said indicators, to interrupt, and possibly negate, the current down hill trip. I believe that even if the election had not evolved into such a mess the market would not be looking much different right now. While the uncertainty has probably helped to accelerate the recent swoon what this really is about is deteriorating fundamentals. After all it has been clear since election Tuesday that the political gridlock will be preserved no matter who will eventually take seat in the White House. Considering all that I don't see why any relief rally should be sustainable and not just another great short setup. As indicated, using options is attractive under this scenario. I believe that seeking a position that would mature over a month to three months seems more attractive than that of a day trading strategy, given the wild jumps without true direction that we are experiencing. Contrary to the point you are trying to make those "wild jumps" is exactly why in the current market environment daytrading is a much more profitable proposition. There's a lot of very nice and tradable trends you just have to be willing to shift downwards in timeframe. Dave

To: X Y Zebra who wrote (7459)	11/18/2000 11:38:21 PM
From: Jorj X Mckie	Read Replies (1) \| Respond to of 10876

yeah, that's what I meant to say. Seriously, from where I stand, the network infrastructure buildout is still very healthy. There are many shifts in where the strength is, but despite all of the negative press, the networking sector is still powering ahead. There is still much in the way of end user applications to be unveiled as more bandwidth becomes available to the home. This should light a fire in the software sector further down the road. And B2B is turning out to be an effective way for businesses to cut costs in the supply chain. Maybe there are more stock market excesses to be wrung out, but the basic business drivers are stil there for the majority of the companies out there.