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To: Judy who wrote (7302)	3/23/1998 11:11:00 PM
From: Robert Graham	Respond to of 42787

I understand the criteria is not cut and dry. But since this is the case, there must be ways to deal with this. All you need is a large inflow of money into particular industries and stocks to make a position play profitable, no matter what the specific reason is that would explain the institutions actions. Following large block trades in where the money is going is one way, but this would be a more reactive way than the perspective that this "big picture" can provide you. So to summarize what you have said, the institutions look for a promising fundamental outlook and a good story to go behind it with respect to the sector and its industries. In evaluating a sectors outlook, they have some risk vs reward measures that they use to evaluate one sector over another as a place for their money. I suspect this has to do with their comparative projected earnings outlooks. I also image this has to do with the timeliness of a sector realizing this projected earnings outlook. So it appears you formulate a story based on evolving technology and other business motivations which can be in itself cyclical in nature. I suspect analyst reports help here. But then don't the analyst reports come out after the fact with respect to the story the institutions follow? Then you look to see what sector is in the best position to realize their story, and most particularly the likelihood of leadership being able to follow through. Do you first wait for evidence through the leadership's fundamentals like an improving earnings picture? This would simplify this picture which you can easily find yourself second guessing. Do you then monitor these sectors and associated industry groups for the inflow of institutional money? I imagine institutions also have familiar and repeating stories, such as that of the oil industries when the price of oil starts to move up. Once you see a sector and particular industries show technical improvement through this inflow of institutional money, then I imagine you look to time your entry into specific stocks. Would these stocks indeed be considered the leaders of their respective industries? Is this where the institutions first place their money when they rotate sectors? Now once the institutions have ridden up key stocks in particular industries, what criteria would they use to exit? Would this be more of a technical nature, or fundamental in terms of an industry that has become overvalued? I imagine they would want to start selling when the stock is still demonstrating upward strength. Would their decision with respect to timing their exit also have to do with other industries that for fundamental reasons now have popped on their radar screen? I imagine the institution would be less likely to move their money into cash and bonds unless they see evidence of a market correction in the works which implies once again the technicals of the market. Thank you for your reply, Judy. Rambling discussions work for me. ;) Bob Graham

To: Judy who wrote (7302)	3/23/1998 11:15:00 PM
From: Robert Graham	Read Replies (1) \| Respond to of 42787

I agree that fundamentally this market looks to be overextended, but fundamentals as you know is not a good way in timing the market. It only can help determine what may be "up ahead" for you assuming a degree of efficiency to the market. The technicals I have not been following that closely. However, when I see eroding market leadership as in the techs, IMO this makes further gains more precarious. Without this strong and visible leadership, the market lacks the "character" that it had in its previous run that would indicate a continuing and growing strength into his bull run that is fueled by the speculative public monies. Instead the market uptrend has been for the most part the result of large amounts of money being moved into the market in a measured way by the institutions, along with some speculation that has come along with this, and the professional element which is more likely to take the other side of the trade. This ends up as a "ratcheting" move up and down and up and down periodically making good headway. Normally I think this would be a desirable state of affairs if it were not so artificially induced which can disappear when the money flow subsides from the institutions. Also this for me makes it more difficult to evaluate market sentiment since when you have this much money flowing in, stocks may rise even on bad news of a transitory nature. What do you think? The speculators as a group appear to be to a large extent elsewhere in the market, some still making plays on the techs not noticing that the music has stopped, others playing the small cap issues which I do not think will not help provide any price leadership to this market. Secondary type of issues and small cap issues cannot help define momentum to the market itself like participation in the larger cap and more prominent issues would. So the quality of the participation by the speculator is lacking this time around So I can see evidence of a qualitative technical nature that the market may be in for a correction. However, as long as there is this liquidity, and as long as there are sectors having visible benefit from this liquidity as can be demonstrated in their associated indices including the more broad market indices (S&P 500 and DJIA), then I think this market rally can continue. I just do not know how technically healthy the sectors are that have been making much of the gains in the market. You said earlier that the funds are selling off sectors to book their quarter's profits. But we still appear to see particular sectors performing. Is this the result of speculative action in the marketplace which is providing demand that the institutions are now selling into? Or do we have sectors and industries that are performing now which will continue to see new monies? Perhaps the telecommunications industry is an example of this. As you can see, I am partially blind to what is going on in the market. But I am still attempting for myself and others here to create a "bigger picture" of what is occurring in the market that some possibilities can be derived from. By the way, if you only have to answer one post at a time, I will understand if you cannot return to this particular post until a later time. After all, there is more to life than the stock market, right? ;) Good trading! Bob Graham PS: Feedback from others on this thread welcome too!