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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Snowshoe who wrote (14884)	12/4/1997 7:02:00 AM
From: j g cordes	Read Replies (1) \| Respond to of 69902

Greg, here's my conceptual challenge on market funding... think it through before coming up with imaginary stuff like "ongoing structural changes in the fund industry may invalidate the trend comparison because: a) an increasing proportion of fund money is in index funds that tend to hold very low cash levels; and b) many now routinely switch back and forth between money market and index funds in retirement accounts, resulting in a ready pool of cash that may not be accounted for on the chart." Define the structures, time does go on, and yes you said "may." Here's my simplistic challenge... Premise One. the market thrives or dies on cash flow, lets call it funding, which gets distributed into niches that have some fluidity and cross support. The more funding the stronger the support for higher prices.. the averages go up. Premise Two. the market eats us, metabolizes, digests, loses, screws up, forgets, gambles away, cost of business, payments to operatives, payments to parachutes, taxes, currency loses... you name it.. the market is always bleeding cash. A good portion, what % age?, is being consumed 25 hours a day, to just stay even. Premise Three. The bigger the size of the market, the bigger the cost of staying afloat. Yes, there are some economies of size, but the rule still holds. Premise Four. A Dow 2000, receiving monthly funding of 16 billion, is like a fighter jet, lightweight and packed with energy per weight of aircraft. Lets ratio it as 16/2 = 8. At a Dow of 8000, 16 billion gives 16/8 = 2. The question is, what ratio is needed to just keep this Dowship in the air? Is it 1.2, or .5, or 3? Maybe 16 billion is just enough to putter around at an altitude of 7500 to 8200. Jim