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Strategies & Market Trends : Tech Stock Options -- Ignore unavailable to you. Want to Upgrade?

To: Robert Graham who wrote (39139)	4/12/1998 9:53:00 AM
From: donald sew	Read Replies (4) \| Respond to of 58727

Robert, Thanks for your post. Im in full agreement that this market is liquidity driven. Without knowing the exact position or cash on the sidelines/in the funds, the only clue I have as to when this market reacts more normal is my short-term technicals. To explain again, during the main part of this rally, when I received a CLASS SELL, although money could hardly be made with PUTS, the signal still worked. The DOW came down a big 50-100 points, and in a few cases slightly more - almost impossible to make money on these quick intraday dips. However, within the last 2 weeks, there are more and more technical signs that the market is getting back to normal and that we may be at the beginning of a range-trading phase. 2 weeks ago the DOW was down 4 days in a row, although not a huge drop in price but the length of the down period was longer than the previous average of 1 day. Last week the DOW was up 2 days and down 2 days, and for the week it was only up 8 points, and the NAZ and SPX were actually down for the week. I guess one way to look at it is whether the performance of the market over the last 2 weeks is enough confirmation that we are at an interim top. I say yes. Now how will the market react, will it dump hard as some believe, or will it flucuate slightly, and what does slightly mean. I have gotten over the stage of looking for the big win, since I have lost out doing that several times. However, regular fluctuations of 150-250 points(the larger the better), can still produce substantial gains as I have done in the past with my system. I don't think the market will dump hard next week, but I do believe that we will be getting into a more regular pattern where the number of up and down days will be close to equal. Keep in mind that during the strength of this rally, we were having 8-12 up days then 1-1.5 down days. I also strongly believe that we will start seeing 150-300+ point short-term cycles in the very near future. We are already seeing that in the NAZ (using the 5:1 ratio to compart the NAZ with the DOW). This also brings me to the topic of sector rotation, as you mention. It appears that sector rotation can be interpreted in 2 different ways - one being that money is rotating from sector to sector and untill all the sectors become saturated the market will continue to be pushed up. The other perspectice is that money is rotating at the levels they are now are just a technical sign of an interim topping out process. You also mentioned that as liquidity dries up volitility increases. Over the recent past, the NAZ has dropped approximately 300 DOW points (5:1 ratio). Was that due to liquidity slowing down or just money rotating to more promising sectors. Keep in mind that when the NAZ came down that amount the DOW also came down, just not as hard. I am not underestimating the liquidity issue, and I guess I can say that I am attempting to use my short-term technicals to identify when liquidity will slow down/dry up. I firmly believe that the liquidity is now starting to slow down, but far from being dried up yet. I am assuming that when it does dry up, we will not be looking at 150-300 point fluctuations, but will be discussing 500+ point drops. Please do not take this post to an arguement to your post, since I really felt that your comments are legitimate. Just putting a slightly different perspective on it. Seeya