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Pastimes : The Justa and Lars Honors Bob Brinker Investment Club Thread -- Ignore unavailable to you. Want to Upgrade?

To: Alan Bell who wrote (2507)	5/18/2003 12:36:34 PM
From: Lone Ranger	Respond to of 10065

AB, "I wonder if the upcoming tax cut could be a catalyst for people to return to the market." Short answer yes. "Because the state of the economy is substantially psychological, the economy could turn around because people act as if it is a stimulus even if it isn't." The state of the economy is "not" substantially psychological in nature but the state of the "markets" are. That's why even in this area of overvaluation of the indices a material rally is possible. Overvaluation really implies poor long term results but has very little to do with short term moves. That's why we continued to rally in 99 even though we were extremely overvalued. Here's my current thinking. There are many differences in this current rally which contrast it to the rallies of July 02 and Oct 02. Even though some of the technical indicators are stretched to the hilt like the vix and II numbers. If the trend has changed then one would expect these indicators to be stretched even further. Some of the differences in no particular order: This rally has been a gradual rally compared to the previous rallies. Buyers appear to have a greater demand for equities than in previous bear market rallies. Selling is noticeably weaker as evidenced by declines that are bought, dip buyers cushion the decline instead of previously when people nervously began to sell which prolonged the decline. This lack of sellers and increase in buyers makes overhead resistance levels weaker than at any time of the past three years. The sp500 has risen to a 9 month high. The nyse index has risen above its Nov-Jan highs in the past week. The number of stocks reaching new 52 week highs is expanding. Because of my reading and study I will not be surprised to see this rally carry further than most of us realize. Sure there will be corrections and consolidations, and I've hedged a large portion of my gains, but I'm looking at areas to remove my hedges and to allow this current bull uptrend to continue. I continue to expect declines to be bought by dip buyers. It will be interesting to see how much we decline before we resume the current bull uptrend. I'm expecting much less of a decline than most. At any rate that's my current thinking after doing my weekend reading and thinking. And if I'm wrong in my current thinking as proved by further declines in prices, than I currently expect, then my mental stops and trading tactics will be triggered and I'll go back to playing the bear down trend. But once again I doubt it as I sense more worry than most in the current rally.