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

To: Chris who wrote (8217)	5/5/1998 3:29:00 PM
From: Robert Graham	Read Replies (1) \| Respond to of 42787

I think there is a period of consolidation left for this market before new highs are made. Looking at the S&P 500 to see is it follows other indices like NASDAQ is IMO a good idea. This mild correction has some at least one notable similarity to last October: once a psychological 1000 barrier like 8000 and 9000 was broken, there was a run up that topped and toppled the DJIA back to below the 1000-type of barrier. The question right now is will the DJIA maintain a value above 9000. I see the key indices NASDAQ, S&P 500 and DJIA did touch their 50 day MA as I thought they would. Of course chance plays a role here in this past prediction of mine. Still this market adjustment as expected was more significant that previous market sell-offs that bounced from their 20 day MA, and later market strength kept them for periods of time above their...what Chris? 10-day MA? This indicates a strong bull run. The market adjustment ended up happening around the psychological 1000-type barrier of 9000. I think the markets willingness to take profits off of the table helped set this market adjustment up even though I do think there is a growing concern for higher interest rates and even an inflationary economy which will revisit the market in the future. I think it actually would be a healthy move if the market were to consolidate further at this point in time. Cramer's web site has an article that explains why the market took off the way it did after its bounce which formed a bottom. This relates to hedge funds and their influence on the market through their use of index and stock PUT options. Basically this means that the market did not correct as much as the hedge funds thought it would, so they were left with the expensive PUT options they had purchased many which had not showed a profit. After the market adjustment, the value in their PUT options went down to a fraction of the purchase price. So they saw these PUTs as cheap insurance and started to more aggressively purchase stock to capitalize on the market reversal. This as you can see was a self-fulfilling prophesy since the result was the market continuing up. This also explains why the market for a period of time there was going up under small breadth where a group of select stocks were pushing the market higher. I think at this point in time the hedge funds are taking their profits if they already have not been doing this. So in hindsight, this current pullback could of been anticipated independent of the technicals. But then this is one of many factors that give market adjustments their technical character. After all, it comes down to people with allot of money making buy and sell choices that create the technicals of the market. And many of their actions as a group show up as reocurring patterns. Since we as technicians cannot at a given point in time readily ascertain the motivations of the buyers and sellers behind price changes, the price changes themselves become the key as evidence of these patterns. Later the news may come out as to the "whys", but then it may not. Bob Graham