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

To: mishedlo who wrote (76831)	5/11/2001 2:28:14 AM
From: CharlieChina	Read Replies (2) \| Respond to of 99985

No doubt that the month of April and the first two weeks of May 2001 have been challenging to trade and/or position trade. The extreme volatile intra-day price swales and large market-opening gaps have mutated the markets into a "Perfect Storm". A possible reason for this happening is the large number of billion dollar funds. These funds are now forced to move in and out of the market on a intra-day basis in order to balance the equilibrium of their asset mixes which are distorted by the wide spreads of in-balance of orders on market-opening. The safest method to use when sailing through a turbulent "Perfect Storm" environment is to have a clear accurate short-term prospect view of the markets direction and time tables, and to quickly mange the liquidity levels to prevent the least amount of rock-and-roll. Big money has been leaving the equity markets and has been buying US Treasury Bond futures, since April 30, 2001. This indicts that supply to fuel the equity markets is diminishing and addition supply into the market is increasing. This indictor is a reasonably accurate two-week lagging timing tool to identify the future turning point of equity markets. Therefore, using April 30, 2001 as our starting point, we place the possible turning point of the decline to be around May 14, 2001 (+/- 2 days). The confirmation of the micro rally breaking point is 1975 on the NASDAQ. In closing, this tech rally can be broken down by three types of buyers 1. insiders and pro traders; early April 2. short covering, mid to late April 3. small investors, late April and until now The FED can add lighter fuel to continue the flame, briefly, but it takes solid wood to keep it going. Solid wood should be found around NASDAQ 75O or so To show you how strange this past 5 weeks has become, very senior partners around me have now convinced themselves that this rally is real. I'm short this market, so my view is slanted as I write. Im guessing at this point, but the downward thrust this time will be fast and hard, not slow and easy as in the past. I say this as an observation of the VIX . It never dropped to a level that justified the rally. And it seems by its consolidation, when it pops to 31-32, it might be very quick

To: mishedlo who wrote (76831)	5/11/2001 9:38:33 AM
From: t2	Respond to of 99985

The shorts are nervous as hell. That's why they have all covered. That's why unless the institutions step in big time to buy a known event, the shorts will pile on. Did not think that the shorts would be nervous at this time. The FED cut is not going to be a suprise and that is why I felt it makes sense that the shorts have been piling on. Unless you get real buying pushing up the Naz, why bother covering...just keep setting lower and lower stops to the upside. The technicals appear also to be on the short side. That is why I would not be suprised by a drop in the Naz ahead of the FED...but followed by a reversal afterwards. That is when real buying kicks in. I feel it was more a reluctance to buy by institutions. The money inflow into mutual funds as well as high cash levels are supposed to be a positive but there does not appear to be any rush to load up on long positions yet. That is why there is a possibility that mutual funds are waiting for the "sell on the news" after the FED cut. That is my reason for being bullish starting the day of the FED meeting. Of course, my feeling is that it will be a buy or short cover on the news story unfolding. With most stocks above max pain, and the institutions already in, with money flow negative it is silly to be fully invested after this huge runup IMHO. Like I noted above, the insitutions are probably waiting for pullbacks in tech now. What money flow are you talking about? I guess you are talking about flows into individual stocks. I am referring to the inflows into mutual funds that will eventually find their way to stocks but there may be a timing issue. Max pain has worked lately. Does anyone have a success rate on this statistic? I believe it has been right almost every time since last fall. I would love to see the stats on how well it predicts the prices that stocks go out at. If it has a 90% success rate or less, I would be betting that it won't work this time. BTW--bottom line for me is a close higher NEXT Friday than it closed yesterday. The path leading upto to that date will present lots of short term trading opportunities. For my position trades the path does not matter as long as it closes higher. If by chance we get a lift into the FED meeting (today and Monday), then I would just sell and/or possibly go short for the FED meeting.