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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: ratan lal who wrote (18739)	5/19/1998 4:24:00 PM
From: Robert Graham	Read Replies (1) \| Respond to of 94695

Actually I was expecting a small relief rally myself. The market's response to news events like this can be very revealing of the underlying sentiment. Just try not to understand it from a logical basis. After all, we are dealing with people here. Seriously, I think there are basically two types of concurrent market sentiments. One type can occlude the presence of the other type of sentiment. One sentiment is of your speculative public who has concerns only for what is happening now to their fav stocks. If the stock moves up, they jump on the stock. Of the stock moves back down, they see it as a buying opportunity and borrow more money to purchase the stock. If People magazine says "buy", they buy with both hands. If the just purchased a new car because of their recent raise, they are there buying stock "feeling" that everything is wonderful. The trade stock based on their "feelings" which is very tennously connected with the reality around them. And this provides them with the payoff of "feeling good" and feeling the excitement of the trade as they have dollar signed floating in their minds. This is the group that acts as a group in the stock market with the associated IQ drop, and repsonds to news events which can include a runup by one of the market indices being reported on form their favorite evening news reporter. The other group is where the bigger money is likely to be found. They take a longer term view of the market. This includes the mutual funds that with other institutions represent over 70% of the money in the market. They look more at the funamentals and also find places for their large amounts of money that need to be invested in the market. So fundamentals is not the only criteria they use. They can use types of technical analysis including the tape their desk trader uses in the placement of funds. Also they tend to look at the market by sectors since they have so much money to invest at any one time. This group includes the longer term individual investor. When a company like IOM comes out with an earnings surprise, it is the first group of public speculators that jumps on IOM and other companies that they like which somehow can be related to IOM in their minds. The consider GE too "boring". They cannot wait to jump on the next Internet stock which they already have been talking to each other ever since the last selloff of this group. The larger long term investor looks at industry leaders including the blue chips like GE. They are concerned about economic reports. Their purchases and selling take place over a period of time. When this group is caught hastily placing in their bids, it is either because the market is taking off and they need to finish the placement of money that has ben allocated to specific stocks before a price limit is reached, or they are preparing for a market adjustment and they want to place their money in defensive positions or holding places before the correction happens. Now what we have been seeing allot of is the dramatic and exhuberant Group I sentiment from the public speculator. This group only understands "on" and "off" even though they spend most of their time "on" having forgotten about "off". Their participation in the market can be seen at most all times now in the market and this is the group that helps the market to new highs on the backs of the money from Group II. The sentiment of this Group I public speculator is usually very enthusiastic. And if they pull back their trading, it is out of "fear". But they will not remain out of thte market for long. "Greed" and "fear" are the operative words here. IMO the Group II sentiment of the larger longer term market players has been becoming negative over the past few months. This has come out over interest rate concerns and even concerns for inflation. More money has been taking defensive positions in relationship to this topic like for instance in oil and even gold stocks. This group can be even concerned about the lost topic of market overvaluation. What is keeping the funds moving money into the market is the competative nature of the fund business for the public's dollar and the historical record levels of money inflow from the public who participate in the market this way. So they are very reluctant to move money out of the market or sit on new cash for any length of time. But when they do, a market correction happens. A market adjustment can happen like it did this time around when they just pause in their volume purchases. Just some thoughts. Feedback will be appreciated. Bob Graham