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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: SouthFloridaGuy who wrote (1295)	12/6/2000 12:14:44 PM
From: tradermike_1999	Respond to of 74559

Back in the Summer of 1999, I believe it was in August, Greenspan gave testimony to Congress in which he stated that he believed inflationary risks in the economy were growing and hinted that the Federal Reserve would begin raising interest rates shortly. The markets immediately began a selloff and did not bottom for several weeks. During those weeks the psychology in the markets changed to one of great fear. It proved to be temporary though once the markets had their explosive year end rally last year, thanks in part to Greenspan’s offer of a liquidity punch bowl due to his fears of the Y2K bogeyman. That summer day in which Greenspan turned mean and announced himself to be an inflation fighter seems like a long time ago. It was an important day and turning point. Today marked another one. Greenspan talked today to a convention of bankers and announced that he would cut rates if it became clear that the economy was slowing down to much and the risks of a recession loomed. Although he also warned that inflationary pressures still exist, with high oil prices and a tight labor market, bulls took it as a sign that the Federal Reserve will change its stance to neutral in December and some now think that he will bring back the liquidity punch bowl of interest rate cuts in January. And then there is the Presidential deadlock. After the Supreme Court ruled in Bush’s favor yesterday and another Florida Court ruled against one of Gore’s main legal cases it appears now to be only a matter of time for the race to be over. That news gapped the market up over 100 points and then when Greenspan spoke bulls repledged their faith in him. They came out and bought like mad, giving the Nasdaq its biggest one point gain in history. There was a definite change of psychology today. You could see it in the hyperactive talking heads on CNBC. But how long will it last? I think a lot of these bullish analysts and commentators are way to optimistic. Some of the CNBC talking heads appeared to be so overjoyed and giddy that they looked like they might be drunk. It does look like the Fed will change its stance to neutral, but Greenspan gave no hint of when he would lower interest rates. It could be a long time. He will want to see the unemployment and economic misery increase first. It’s no cut and dry thing and the huge economic imbalances have not gone away. Although this new Greenspan does appear to be much more friendlier and jovial than the old grinch we’ve been seeing for the past few years, there is no certainty of when he'll deliver any present. He just promised he would if he thought the real economy needed one. But overall he didn't really say a whole not. The news and commentators made his remarks sound much more important than they really are. No doubt Greenspan will cut interest rates if there are signs of a recession. No doubt inflationary risks still exist. He said nothing that anyone couldn't have figured out before the speech. But it is perceptions that count and today those perceptions made everyone giddy. But, the truth is opinions do not matter. Opinions on where the economy is heading or what the fundamentals are behind a company mean nothing when it comes to profiting from the stock market. My opinions on those things mean nothing and those on CNBC mean even less. What does matter is the ability to read charts and use risk management techniques to profit from them. There are times when bad earning announcements are buying opportunities and other times when good news is a chance to get out before everything tanks. It is the psychology of the market that matters and how it interprets reality. The charts measure this. They are facts and not opinions. The price and volume action of the tape tells you what you need to know.

To: SouthFloridaGuy who wrote (1295)	12/6/2000 1:13:57 PM
From: Tommaso	Read Replies (1) \| Respond to of 74559

Don't fight the tape and don't fight the Fed. Well, the tape has been steadily down, with intermissions, since last spring and the Fed is still sitting on a string of interest rate increases. So I guess it depends on what one is fighting--a one-day reversal plus a little hint from AG, or the actuality of the past year. On the shortest possible horizon, since 9:30 this morning, the dollar is down another one percent against the euro, natural gas is hitting unbelievable levels, oil is still high, gold and silver are up, the stock indices are down, the warnings and bad reports continue to accumulate--and the bullish sentiment is still very high. The only thing missing is the failure of a major financial entity.