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Strategies & Market Trends : Galapagos Islands -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (1418)	9/18/2002 3:53:21 PM
From: MulhollandDrive	Respond to of 57110

interesting link... traders-talk.com D.B. What is your view of the economy? I.I. I have the same view as I did almost two years ago. Back then I opined that we had witnessed the bursting of a bubble and I wrote "...If this is what is happening with the U.S. economy then investors should expect several quarters in which the economy alternates between sub-par growth and negative growth. " (see January, 2001 newsletter) The economy is still dealing with overcapacity issues, and it will take another 3-4 quarters before the first signs of growth acceleration become evident, assuming a) the consumer doesn't break down between now and then, and b) we don't have an exogenous event that interrupts decisively the economy's slow recovery. I would imagine that if the U.S. does go into full scale war with Iraq, the consumers will moderate their spending out of uncertainty, oil prices will temporarily pike up, and the U.S. will have to spend billions of dollars to support the operation, meaning higher government deficits. I am not passing judgment on the appropriateness of the action, I am simply saying that such action -although may be necessary- it will not impact the economy favorably, and definitely, it won't do any good for the stock market. Even under the best case scenario, in which nothing happens and the economy begins to accelerate in late 2003, early 2004, we still have to deal with 4-6 quarters of disappointing corporate profits and a tough investing environment, one that favors flexible strategy and "timing" instead of "buying and holding." D.B. Let me get back to the stock market, before we go into the technicals. If the market does break down, then what? I.I. If the market does break, the it will be swift sharp and short. Keep in mind that in this entire year, NASDAQ for example has not had a rally that lasted more than 3 weeks! We have yet to have the "bear market wonder rally" for the year. I think if the market experiences a sharp break below the July lows, real panic will set in, and that will set up the stage for a 8-12 week rally, going into the end of the year.