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

To: bobby beara who wrote (67798)	1/27/2001 3:17:05 PM
From: Boplicity	Respond to of 99985

The Latest Analysis Seasonal Bias: Positive Week #4. Ending Jan 26, 2001. The Long Term Signal remains at 3-BUY. Let's get ready to Rrrrrrrrrrrummmmmmbbbllllle! The evidence is piling up for an eventual upside breakout for the stock market. The Long Term Signal has been 3-BUY for 8 weeks in a row. The table for Analysis of Concentrated NYSE Member Trading is now at this link. This will allow us to reference this table easily in the future. The link will also appear on the main timing page. It's now 11 weeks in a row that the 4-week moving average of member trading is showing major buy activity. That is the longest streak I have seen. While the Dow has barely budged during this month, the S&P 500 is starting to show some life, up +5.6% from its lowest close this month, and up +2.6% for the month. It may seem small, but that rate of growth is like +30% a year. Another Fed easing or two, and the Dow may hit its former highs. This member indicator is very bullish. I love the NYSE advance-decline line, now up 6 weeks in a row. A rising advance-decline line is something that you can trust. Even the NASDAQ is showing a little bit of strength this month. The member buying must be concentrated in the small caps, which were hit hard by the mutual fund selling for tax loss reasons last year. The members scooped up those losers and are now pushing them to the upside. This could be the quarter for outperformance by the small caps. However they are the first to lag when the bull gets mature, so you need to watch that Russell 2000 index for signs of retreat. The Fed determines the course of short term interest rates this Wednesday. Interest rates continue to trend downwards, as I compare current rates to four weeks ago. I think we will get a -0.5% rate cut. However I think the pros are going to confuse the public by selling the news. The media will mislead you that traders fear the Fed is too late to stop a recession. It's a fake! Buy that dip because we will go higher. The market makers will drop stocks to provide that batch to the mutual funds, their best customers. The NASDAQ is up about +12% this month alone. That's not a collapse; that's a recovery. I showed a previous long term chart of corrections in this semi-LOG monthly NASDAQ chart. I observed that previous steep corrections ended when the NASDAQ closes higher at month end than the previous month. There is a great chance this will happen this month. Just another indication that the stock market is now anticipating that the economy will eventually get better, now that the Grinchspan has changed his tilt. The mutual funds have been taking in more cash this month, though at a slower pace than last January. You can read about it in the weekly series for Trim Tabs at www.IndividualInvestor.com. The equity funds already have lots of cash. The odds are they put it to work. If they don't, it's against their long term interests to provoke a further decline in the stock market by refusing to buy. My Option Timing Signal is telling me sentiment is improving amongst traders. They are buying less puts, indicating less fear of a collapse. I measure fear by the trend of the ratios of equity puts over equity calls. As that ratio trends downward, the stock market tends to rise. One quantitative fly in the ointment is the old sentiment indicator for newsletter writers from Investor's Intelligence. These writers are too bullish compared to previous bottoms in the market. The best rallies occur when bearish sentiment is high. Their readers may have held on during the declines. That could mean these readers are not available to push up stocks now, since they are already invested. The Trim Tabs article above indirectly supports this idea, as new cash is coming into equity funds at lower levels than last year. The other rally limiter is the aftereffect of the margin mania collapse. Clearly, margin usage has shrunk during the recent market decline. In fact, I think the collapse is over. But I do not think investors will be quick to climb aboard that train again. So the new bull will need to prove itself without the aid of the marginers. Those marginers created the poor advance-decline line of the past. They concentrated their money in few stocks, while ignoring the majority. This created the bubble that busted. This time we will just have to settle for a slowly rising stock market on good breadth, just like the old days. see this link blarg.net

To: bobby beara who wrote (67798)	1/27/2001 3:21:30 PM
From: Boplicity	Read Replies (4) \| Respond to of 99985

The advance-decline line is reality [From Yahoo] rckolon (50/M) 1/26/01 4:11 pm The number of stocks up one day minus the number of stocks down that same day. Keep a running sum of the difference and plot it. stockcharts.com stockcharts.com That's the advance-decline line. When it goes up, that means stocks in general are going up. When it points down, that means stocks in general are going down. When the indexes don't agree with the advance-decline line direction, we are operating under an illusion. That happens often enough. We need to figure out what that illusion is, when these divergences occur. Right now, the reality is stocks are going up by the a-d line. See the links. So if it looks like gloom and doom is keeping stocks depressed, that must be an illusion! This illusion has been happening for about two months. I estimate that a big illusion's lifespan is about 6 months. So we'll probably keep hearing about the economy collapsing (ahem) for several more months. But the reality is STOCKS ARE GOING UP NOW. It's time to understand the photograph, not the illusion. Rich clubs.yahoo.com