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Strategies & Market Trends : Stock Attack -- A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Chris who wrote (6508)	3/2/1998 10:34:00 AM
From: Robert Graham	Respond to of 42787

Don't let some of those market timers throw you over their concerns for an upcoming correction. This is a trap that some technicians can fall into which is a call that is based on more of the fundamentals of the market in terms of overvaluation instead of coming from the technicals that they follow. Instead of seeing what is on their charts, they start to incorporate the fundamentally based fear of the market prices being overvalued as in "it has gone up too much". Then they start looking for evidence of their bias which will predetermine what they end up seeing in their charts. Some have called for a large, imminent market correction on the order of 20%. This is the same thing I have been hearing from the public at large for months now. Does anyone know if there has been given solid supporting evidence of this possibility? Calling for a normal "cosolidation" or even a "retrace" is one thing. Fearing a large market correction is entirely another. I think the difference in this case comes from fear. Not to discredit an experienced technician's previous record. They can be knowledgeable and I daresay even accurate in their past market calls. However, I see this is as mistake that I would attribute to more of a technician who does not have enough experience under their belt to provide them a solid grounding in the market in order for them to make good, reliable judgement calls in a changing market. This does happen to some of the better performing technicians, and at times even the more experienced technicians who have been around for multiple market cycles make this same mistake. But in many instances I think you can point to the technician's lack of market experience as the culprit. This is why it is not good to follow people too closely during their initial successes no matter how good they look or how successful they manage to be. There are allot of implicit assumptions they are making about the market which they are not aware of and may not initially get in the way of their success. As soon as the market begins to change on them, or the market does something they have no reference through their experience that can provide them with necessary perspective, they begin to make major mistakes due to faulty thinking. Remember I said that it is not what you know that you know and what you know that you do not know that gets you in trouble. It is what you do not know that you do not know that will undermine your success and can actually help engineer your eventual demise in the market. This is particularly true when a person has a good amount of initial success, for they become less present to the developing signs that their understanding of the markets is flawed. I have seen this many times. Each market creates its share of "experts" that actually make what appear to be good calls. That is why you see "experts" that do make some very good calls get discovered by the press. This may continue though the current market cycle. When the market is in a strong bull cycle, it tends to float all boats making the market much more "predictable" than it would be otherwise. However, very few of them are around by the next market cycle making those same impressive calls. Many do not make it even this far because no one listens to them after they have ended up making some impressive bad calls which demonstrates their inexperience. Recently I have not been closely tracking the markets, but through my understanding of some of the fundamental aspects of the market and also my understanding of how a market can behave through its cycle, I can tell you that IMO I think we are seeing a market in the latter part of its longer term bull cycle. Some of the major difference between this market and markets of the past is the record amount of money participating in the market through funds. This is one aspect of the market that many continue to underestimate or even not have as a part of their understanding of this current day market. Also there is the growing global participation in foreign markets, including ours. This also in part reflects on the growing awareness of how all economies interrelate on a global level. Both are reasons that there is allot of available cash in the market right now that is being moved into our markets. The inflow of money from the funds, both new money and the "old" money that they had sitting in bonds, alone can keep this market moving up for the time being, which some refer to as market liquidity. I think Judy has referred to this in the past. Also IMO toward the end of a bull market, we will cintinue too see strong moves up like we have been experiencing. This market will not go away by quickly sputtering into a downslide of a longer term bear market. The top will take up some time to unfold. This is not to say that we will not see some retraces by the market before it moves into the bear part of its cycle. I will also say that I do see the high tech market leadership waning more on each successive rally. Who knows? Perhaps we have already started to see the beginnings of the end of this bull market? Or perhaps we are seeing the beginnings of a major leadership change in the market? If this is the case, then I wonder what industry will be the new market leader? I have seen evidence after our previous market correction of market players very eager to derive more profits in this market. You also have the fundies that have become more competitive over time and more short term oriented as a group. I suspect there are a record amount of new hedge funds this market cycle. Also I have seen more of the average Joe and Jane Public participating in the markets. This participation in the markets by the public can be seen as a contrarian indicator. However, before the market dumps, this enthusiasm by the public for the stock market will bring in a fresh inflow of liquidity into the marketplace before a major correction or bear market happens. At least my observations here are what I have been able to notice about the market cycle on an informal basis over a period of time and how it responds to sentiment and liquidity. Also I want to say I think that smart technicians that have not been around longer than one market cycle still can be very worthwhile to listen to as long as you keep my warning in mind to not follow them too closely and always do your own thinking. You should make your own decisions and take responsibility for your the results no matter who is making that buy or sell recommendation to you. So everyone should be making their own decisions anyway and always evaluate the observations made by others, particularly the ones recognized as "market gurus". Any comments? Bob Graham >