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

To: Chris who wrote (7977)	4/28/1998 12:42:00 PM
From: Robert Graham	Read Replies (3) \| Respond to of 42787

I think it is a bit premature to enter the market on a long position right now. Always wait for two to three bounces to validate support. Also I would move in a stock that demonstrates upward price strength which means that HWP would need to move up from its support under good buying before I would consider a trade. Currently I see HWP is going down with the larger blocks helping to lead the price down. IMO this stock is not ready for a purchase. I am thinking that this market adjustment is not over with. Fund buying on the last bottom is a positive sign. IMO this has helped the market bounce. However, look at the profit taking and how much of today's gain has been given back. This is making some nervous and ready to exit their long trades if the market goes down any further. Also the S&P Futures is growing and may trigger a selling program. I am not that knowledgeable in this particular area, but I am always aware of the possibility of program buying and selling and its effect on the market. The long bond continues to move down. The fear of interest rates from what I see has been a growing concern of the longer term money in the market. The market sentiment apparently was leaning toward a sell off and the news in the WSJ about the Fed leaning to tightening the money supply was the news that was needed for the market to break. Next the Washington Post comes out to say that the fears about an interest rate increase is unwarranted which feeds on the positive market sentiment of the ST players. But I want to note here that I think the market players that are the ones that have had increasing concerns over interest rates and the economy may respond differently. They take the longer term perspective and are not as reactive to a particular news item. Here you have long bond still going up, and a rally that has not been able to sustain profit taking, as signs that perhaps the "fears" that helped start this market adjustment are not satisfied and still are present in the market. The topic of interest rate concerns have been growing and getting more press over the recent past. Also the Fed has not met yet to provide any definitive answer to the market's growing concern about interest rates. Furthermore, I think the sentiment of the ST player in the market which includes the public speculator has been masking the growing negative fears over higher interest rates and a slowing economy. What I find odd here is that this is happening during time where key companies are showing revenue and earnings growth slowdown that even cannot be explained by the Asian situation but for instance in INTC case by slowing domestic demand. So I do think the economy is slowing down in some areas which would be a positive to help keep the Fed from hiking interest rates. But this does not stop the market from "fearing" interest rate hikes. Still, as mentioned in Barron's, one concern of the Fed is over the money supply itself. I will attempt to explain what little I personally understand about money supply and GNP in light of that Barron's article. I may make mistakes here, so I appreciate if anyone more knowledgeable provides more details here. The money supply has a kind of inverse relationship with GNP. The thinking here is that expansion and growth reduces the money supply, the economy slows down, money supply grows, and this cycle starts all over again. The money flow and supply figures are indicating to the Fed that there is high enough of a level to fuel a faster paced economy which is what they do not want to see happen. Apparently the Fed is right now for a slowing economy, not one that will speed up. This concern along with the concern of the market not recognizing its overvalued nature are real concerns of the Fed. I personally think if the slowing revenue and earnings that the market has been experiencing is any indication, the economy is slowing. I think this is what the Fed want to happen. So they do not want readily available money to fuel right now a heating back up of the economy. However, the market thinks the economy is doing very well and really has not come to terms with the reality of a slowing economy. Even though key companies are reporting a slowing in revenue and earnings, other companies are probably doing well and this can be experienced on a personal level in everyone's daily life. So as long as the market "feels" based on their current experiences that the economy is doing well, they will continue to exude confidence in the market which has become "predictable" to them in its continually increasing value. The market will then look for "evidence" to support how they "feel". This is primarily true with the public speculator in the market. However there is a growing element in the market which IMO is made up of the longer term more conservative players who apparently is concerned about the slowing revenue streams even though the picture that they see is still not in focus for them. The market response to the WSJ news article indicates to me these longer term more conservative players are not the only ones that are getting nervous in this market. Just some thoughts. Bob Graham