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Politics : High Tolerance Plasticity -- Ignore unavailable to you. Want to Upgrade?

To: kodiak_bull who wrote (13735)	5/8/2002 10:30:16 PM
From: Warpfactor	Read Replies (2) \| Respond to of 23153

Until further notice, we are in rally mode. The ARMS Index is what I'm looking at, and its undefeated record. Tomorrow is day 20 since the ARMS tagged the 1.50 level. As you know, the low is always in by day 20. Looks like we got our low on the Dow on day 17 (Monday). The Dow will just not break down below that 9800 area. We should have a not insubstantial rally as a result. 25-30% on $COMPQ would be the norm ARMS index bounce - of course 7.5% is already on the books. Keep in mind that in February we had a really pathetic bounce of only about 15% bottom to top. I believe that the signal at that time was artificially inflated by the accounting irregularity stocks, they really skewed the market volume and A-D totals. The market condition was not accurately reflected in the ARMS Index at that time. IMO. I am still concerned that we didn't get a power washout with VIX +30 and the MacLellans in their super buy ranges. However, the put-call signals said way oversold, so there was some confirmation that a market direction reversal was on. I Put some tech money to work today. Not a whole lot. Picked up PHTN @ 41.5 and LLTC @ 38.2. Also added to KLAC and CYMI positions. Also re-entered MVK (18.15) in the energy sector. Since I haven't really made any money yet in these, I cannot be accused of being a Monday morning QB. What I would like to see to confirm a rally in the next several trading days would be nervous selling in the first 30 minutes of trading, followed by a reversal as fund/institutions scoop up those shares. This was a daily happening back in the post Sept 11 rise, in Nov/Dec.. JMO - For all I know the NAZ may give up the 120 tomorrow and set new lows. But, investors have to put their faith in something. Can't just blow around in the wind. Warp

To: kodiak_bull who wrote (13735)	5/8/2002 11:04:05 PM
From: pvz	Read Replies (1) \| Respond to of 23153

KB, et al, I wish I knew for sure! I have a list of charts though, which are beginning to paint a promising macro technical picture and suggest that this is more than just a technical bounce: 1. Nasdaq High-lows (cumulative) bottomed a while ago, and last week crossed above their 20 dma, for the first time since October 2000: stockcharts.com[e,a]whulnnay[pb50!b20][ilah12,26,9][J4156670,Y]&pref=G 2. Put/call ratio to VIX: 20dma is closing in on its 100dma. If it does this, it correlates very well with real buy signals: stockcharts.com[e,a]dhllnyay[dd][pb20!b100!b75!b300!f][vc60][J3314185,Y]&pref=G 3. The BPNDX turned back up sharply after hitting a low of 17% yesterday. This one hit me like a thunderbolt last Saturday, when I realised with 80% of NDX stocks showing sell signals, it was a matter of looking over to the other side. While one did not know when it would turn around, it was evident from past experience that from the 20% point onwards, it's a matter of when, not if, the market rallies significantly. stockcharts.com[e,a]dhllnnay[pb20!b50][iue12,26,9!ub14!ud50!ll14!lp14,3,3][J3161281,Y]&pref=G 4. I have also done quite a bit of work backtesting (to 1988) the Fed Model, which measures the valuation of the S&P against the 10 year yield. I can't post a link here because it's all on excel and I have some questions regarding some of the earnings assumptions that go into this model. However, it does indicate that the market is seldom undervalued for long, and it is currently more fairly valued than it has been in the last couple of years. Add to the above that most of the widely followed stocks were showing extreme valuations by yesterday, as indicated by their CCI and ADX. On the negative side, the vast market that is not represented by the qqq, did not come even close to capitulating or bottoming out. The only explanation I can find for this, is that there was never a recession in that part of the economy and those stocks collectively are not overvalued and therefore did not need to capitulate yet. There is no doubt in my mind that they will come down at some point. For now, if the indexes rally, we could see some sector rotation. Today could have been a resetting of the indicators, but I think it is more likely that a new up move is now starting in view of the more positive big picture economic information that is emerging (GDP, productivity) - as opposed to a deteriorating economic environment. Having said that, I think we could easily retest wholly or partially the gains that were made today. On the other hand we might not. My plan is to not take profits yet because I didn't margin myself to the hilt (as I did in Oct 1998). If I had done so, I would be looking to unload some profits pretty soon though. If we make some higher lows in the next couple of days, I'm planning to add to some positions. If my theory is all wrong, I will bail on the purchases I made yesterday. So where does all this point? I (an eternal optimist, admittedly) am looking for further upside, but not necessarily without some downside along the way. How far will it go? I have no idea for now but trust that I will see the indicators will pointing south when the rally starts petering out.