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To: Ally who wrote (6252)	3/18/2001 1:11:28 PM
From: Michael Watkins	Read Replies (1) \| Respond to of 8925

I have to agree with you on risk/reward and timing. Folks have been in a hurry to buy the bottom all the way down from 5000 after all. What's the hurry, we've been asking ourselves around here for more than twelve months! I'm confident that an appreciation for History, Fear and Greed will work together for the patient speculator and investor. On balance, people have short memories or at least weight more recent events more strongly than those more distant. While now and 1998 are different, in my mind we can look at the two times to speculate what is likely not to transpire this time. ottographs.com Not In My Backyard In 1998, the potential failure and subsequent rescue of Long Term Capital Management, as well as the Asian financial crisis, loomed large in people's minds. Fear was palpable, but clearly at some point, the crowd decided that it was a problem largely contained within other people's back yard - that plus the ever accommodating Federal Reserve had demonstrated that it would would play the hero and ensure that financial problems remained overseas problems. And their efforts worked, then. So in 1998, and only after setting up a successful test of bottom on the daily chart (no such pattern exists yet today), did the COMPX (and other markets) move higher. Not only did it move higher, it leapt upwards from early Oct 1998 until Feb 1999 for a move of about 1200 points -- a strong directional move supported by higher lows and higher highs on the daily charts, and on the weekly chart a single massive upswing. Heady stuff! ottographs.com In denial? This time it is different Perhaps we are in the denial stage now. Even though so many portfolios have taken incredible beatings, palpable excitement, and not just a little hope, exists on Silicon Investor and in chat rooms, barbershops, living rooms, and water coolers all over the world. Many appear to be expecting a re-run of 1998 or are simply buying into the veiled lie that everything always bounces back. Fast forward to today - it is different. ottographs.com - these are not comparable market conditions; - problems are in our back yard as well as world wide; - and, coming off the back of a massive speculative bubble, its easy to conclude that the outcome will be different. Its no surprise that the outcome is already different. If for no other reason than the underlying problems are closer to home - which means we can expect at minimum a lot of backing and filling as the crowd continually revaluates whether the risks are weighted towards further downside or missing out on upside - we can be reasonably confident that there will be ample opportunities to establish long positions at points where risk can be minimized. Each individuals 'long term capital management' plan needs to ensure that funds are left to fight another day.

To: Ally who wrote (6252)	3/18/2001 3:20:31 PM
From: ig	Respond to of 8925

However, what is the risk/reward ratio for such a bet? Naz has shown such a pattern several occasions before, and it continues to drop further. I have taken a few shots already this year and made money on them, even though the Naz ultimately dropped farther. It's not that hard and there is very little risk. On several days over the past few months I have caught the bottom of the day on a day that I thought could be The Bottom, ridden the bounce, and then decided by the end of the day whether or not I wanted to hold overnight. On two of the days I decided to hold, but had to sell the next day (for a nice profit), because I didn't see the kind of follow-through necessary to justify holding another day. I have had only one attempt to catch The Bottom go bad on me, and that was by only 1/4 of a point. (My inititial stop on the trade was hit.) The rest of the trades have all reached at least the break-even stop before I exited. Basically, these are daytrades with the potential to becomes longer-term holds -- or I can look at them as entries for longer-term holds, but with the option treat them as successful daytrades by bailing out at no worse than break-even. Naturally, I am looking at it from the perspective of an active trader. I watch the market all day to find one or two good daytrades, and sometimes while I am doing that there comes along a situation that could represent The Bottom. When that happens, I take a shot at it; a very safe shot that risks almost nothing, but will pay off very nicely someday. The worst that happens is that the trade becomes a typical daytrade, which I am doing all day anyway. You may be an investor (rather than a trader) who is not able to monitor your entries and stops so closely, in which case these types of short-timeframe plays are not available to you. However, even as an investor, you should still be "appreciating the potential for a bottom very soon." You should be watching closely for a reversal of the trend on the daily charts. If you enter at the earliest point of a confirmed trend reversal on the dailies, your risk/reward ratio will be very good indeed. (It is the same thing I do on the 2-, 5-, and 15-minute charts, but simply with a larger timeframe.) ig