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

To: CharlieChina who wrote (76833)	5/11/2001 7:02:21 AM
From: s berg	Read Replies (2) \| Respond to of 99985

Nicholas Gates what is the info source for your indicators. They all make sense. But when you say that institutions started buying treasurys May (c/w seasonal pattern of earning season rallies followed be declines) is that from trim tabs. Likewise insiders buying early April, is that from CBOE tracking futures contract purchases. Just guessing where you get your info. Also agree about potential for "Perfect Storm". With current levels of poor liquidity, volatility spreading from Nasdaq to S&P I think you have growing risks of both buying and selling panics. What happens when the volatility wave hits 401k investors. Haim is correct to emphasize this vulnerability. For example, government employees can move their index funds into bonds but there is at least a one month lag from when they decide to shift. Makes one wonder how, if people pull money out of 401ks, the government retirement plans implement the change, i.e. do they pull the money out at once at the end of each month. I believe there is a risk, hard to quantify with conventional TA, of a one day 87 like or worst watershed decline in S&P. If anything, contrary to conventional wisdom, the current sharp rally, by increasing volatility, may increase the risk of a massive drop.

To: CharlieChina who wrote (76833)	5/11/2001 11:34:55 AM
From: Keith Feral	Read Replies (1) \| Respond to of 99985

I would love to buy more equities with the NASDAQ at 750. What the hell, we are down 3000 this year and life doesn't feel that much different. Why not buy things at or below asset value? I think the biggest problem with your assessment is that it does not factor the fundementals that drive the market over the long term - 401K contributions and other monthly retirements plans that dollar cost average the market. The traders can pick up nickels and dimes around the fluctuation of the averages over short periods of time. However, they never defeat the long term positives that make investmenting work over the long term. Your assessment that the big money has been buying Treasuries seems a bit far fetched, given that yileds on 10 and 30 year notes have screamed higher despite 4 consective interest rate hikes. Also, the rally that you suggest was only created by a short term opportunity created by the professional trader. How could they create the downside and create the upside. Do the professional traders control the Yin and the Yang? I wish I were one of them. This whole correction has everything to do with the overvaluation of technology stocks over the past 24 months. The recent slowdown in telecom spending exposed the weakness of the equipment manufacturers. The collapse in tech has been going on for 18 months since the bell sounded after the Millenium Party. There is absolutely no reason for most of the stocks to bounce back yet, but to suggest another 50% washout in NASDAQ values from here probably doesn't make much sense either. I don't think that Greenspan is doing anythng to support the market at this point. The clear mandate for lower interest rates stems from the inversion of the yield curve with FED fund rates trading above the 2 year and 5 year notes. It makes no sense & now the rising unemployment provides the excuse for further FED action to reduce FED fund rates below 4%. Recessions are good for equities because it forces interest rates to come down. However, there is usually a huge correction associated with the anticipation of a recession. Negative EPS surprises and corporate restructurings halt any meaningful improvements in the market. At this point, you have to balance TA short term trading calls with the power of money flow into equities, i. e. 401K contributions. It seems a bit late in the game to be waiting for the next 50% correction.