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To: Return to Sender who wrote (7667)	2/3/2004 6:40:17 PM
From: Sam Citron	Respond to of 13403

Good points. (1) RE: Dow Theory Yes, the divergence between the transports and the Dow is a concern. Perhaps it is reflective of $35/bbl oil or maybe because of the tremendous competitive pressures in the airline industry. I don't know, but it is one indicator that makes me somewhat nervous. (2) RE: Put to call ratio I'm less impressed by the put to call ratio as an indicator, not because I don't think it embodies important sentiment info (at least to contrarians), but because I don't know how to translate it as a timing tool to discover the inflection point in the market. I would have thought that it is quite rare for the ratio to be one, given the historical tendency for call trading to predominate. If it was one in early December, that suggests to me that it was probably a ST buy signal at that time. But the fact that call buying is now more prevalent may merely reflect the usual optimistic condition of those who typically buy options. At some theoretical level, I might be concerned, but I don't know historically at what point the P/C signals a sell. (3) Reaction of stock prices to news is IMHO an excellent ST indicator. When they sell on good news, it suggests that things are priced for perfection. When the opposite happens, it may be a pretty good time to buy. (4) Your point about AD and what got him into trouble has some validity. If you have deep enough pockets, doubling up on losing positions can be a respectable strategy, though it tends to defy the conventional wisdom. I think that daytrading is still regarded as a matter of luck by most people rather than as a serious path to sustainable profits and that it is just a matter of time before any given daytrader implodes. One of the first and best books I ever read about trading was Jesse Livermore's Reminiscences of a Stock Operator when I was about 16. Naturally, when I later heard that he committed suicide, it was quite a blow, because I considered him a brilliant trader. I guess he believed it too. So I suppose hubris is the ultimate enemy. (5) The dangers of margin trading are something I learned early in my career in the commodity markets where 5% is the norm. I am happy to say that I did not have to learn this lesson the painful way. It is just something I have never been inclined to do. Margin debt is also a good indicator that bears watching. (6) Sir John Templeton's recent statement about the risks of the market is for me a more sobering pronouncement than any particular indicator. Message 19763573 Sam