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Strategies & Market Trends : LindyBill's Ballroom -- Ignore unavailable to you. Want to Upgrade?

To: LindyBill who wrote (118)	10/3/2001 4:39:43 PM
From: Uncle Frank	Read Replies (2) \| Respond to of 248

>> I, of course, am saying, drop, baby, drop! As a new-born dark side trader, you should be rooting for a huge spike so you can short it. I'm afraid that your position in bearx has made you less than objective about the process, though. Based on historical quotes, you bought it at the top end of its 2 year range. chart.yahoo.com Due to the relatively short nature of bear markets and where we stand today, I consider it a risky play. bwtfdik uf

To: LindyBill who wrote (118)	10/3/2001 10:37:25 PM
From: Robin Plunder	Read Replies (1) \| Respond to of 248

LindyBill, here are some thoughts on whether or not this is a short term bottom or a longer term bottom, based in terms of looking at the market from the point of view of psychological, monetary, and valuation indicators: 1)Historically, going back to 1960, there has never been an instance when the 10 day moving average of the Arms index had three signals over 1.5 within a period of 1 year or so. There have been several cases of two signals within a few months of eachother, such as we had this year, in which we had a signal in March and another in August. In order for the market to continue the bear trend, we would need to get another signal within the next six months or so, and this would be unprecedented. Not to say that it can't happen, but it would be extremely unusual to return to such high levels of selling after already experiencing two huge selling experiences in such a short period of time. 2)The smart money index has a lead time of several months, and has currently been heading up strongly, providing support for the idea that at least over the next few months we should expect upward movement in stocks. 3)The vix hit 57, which is near the high points of 60 experienced over the last 10-15 years. In all cases when the vix got this high, the selling pressure was diminished over the intermediate term. 4)Monetarily, the yield curve is extremely positive. In order for the bear market to continue, it would seem that this curve would have to shift, perhaps in conjunction with the fed draining money. At the moment, most folks are looking for more fed cuts and stimulation, it seems unlikely that the yield curve will become less steep over the next few months. 5)Valuations....currently we are undervalued by the IBES model, if stocks rise too quickly and become overvalued, or if earnings estimates are cut sharply, maybe we could get overvalued and the market retreat somewhat. If the fed continues to cut interest rates, stock valuations will be supported in comparison. All these point to an end to the bear market. If the bear market were to resume, these indicators should also send a signal, eg Arms indicator and vix falling to low levels, smart money index turning negative, money supply dropping, interest rates stagnant or rising, valuation levels too high. I like these types of indicators as a quantitative means of forming an opinion of the market. If the consumer drags the economy down further next year, would this be anticipated by these indicators? Probably the smart money index would be the key one to watch, as this represents the thinking of the professionals, who are usually right. Another one would be the commitment of traders for the sp500, which I think is still negative....might be useful to watch if it turns more positive or continues negative this fall. Robin