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Strategies & Market Trends : Classic TA Workplace -- Ignore unavailable to you. Want to Upgrade?

To: AllansAlias who wrote (7418)	7/18/2001 11:09:01 AM
From: pater tenebrarum	Read Replies (2) \| Respond to of 209892

just saw your NAZ count...there IS a bearish possibility. namely, that this is a leading diagonal first wave down. admittedly that's a rare beast, not a high probability interpretation. we have a mixed, in fact wildly oscillating sentiment picture for the short term (e.g. the Rydex ratio jumps around in 0.06 steps lately, depending on whether we have an up or a down day), with both bulls and bears quick to jump on perceived strength or weakness. however, the intermediate to long term sentiment backdrop is horribly complacent. to wit: small traders now hold a record high net long position in S&P futures, and the slow moving Investor's Intelligence advisors poll has the worst bull/bear ratio of the whole year, with bears clocking in BELOW 26% for two weeks running. these two are the exact opposite to the '94 situation, shortly before the mania leg of the bull market really took off. what is also different is that the Fed was tightening in '94, while it is currently looser than EVER. it's not just the absolute level of the FF rate that determines the looseness of the Fed - it's the REAL FF rate, plus the amount of liquidity injections into the system. last week we had a RECORD week, with repos and coupon passes exceeding 25 billion. this goes to show that monetary stimulus is extra-ordinarily ineffective at this time - the market merely managed to tread water, in spite of the mid week volatility. the small traders commitments and the II poll gave a secular, LT bull market signal in '94, with expectations overly bearish BECAUSE the Fed was tight. they are giving an LT bear market signal now, with confidence in the Fed's ability to stem the intensifying economic downturn extremely high. this suggests that surprises will continue to be on the downside for quite some time...possibly similar to the behavior of the Japanese market over the past decade, a trading range for the NAZ at lower levels.