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

To: Robert Graham who wrote (9000)	5/28/1998 1:45:00 PM
From: Robert Graham	Read Replies (2) \| Respond to of 42787

I just looked at this last hour's market figures from Briefing. Breadth and volume (up compared with down) still good and since the market continues to remain in its upward wedge pattern, market gains increased in DJIA and S&P 500. The % changes in up and down volume over a period of time appear to show that the values are closing, and TRIN remains above 1 even though TICK went more positive on this intraday upswing made by the market. At this point, the TICK and TRIN are just "ripples", but the "wave" is the breadth and volume figures. Even if TICK and TRIN were to degrade, I would not look at this as significant until I saw a corresponding change in the market breadth and volume figures. Note that I am looking at the DJIA and not the NASDAQ. Since money over a period of time is in the process of leaving the NADSDAQ stocks and moving into more defensive issues in the S&P 500 and the DJIA, the NASDAQ will be decoupling from the rest of the market. Yesterday was a good indicator of this condition. It was the DJIA that indicated to me the market was turning around, not the NASDAQ index. However, old habits are hard to die, so the public looks at the NASDAQ for their confidence in the market in asking them the question "Is it safe yet?". We can call this a sentiment type of indicator for the time being. When the market was turning around, and NASDAQ joined in on the turnaround, then the actual turnaround that was taking place was visible on everyone's radar screen which helped to move more money to covering short positions and adding to long positions. So the NASDAQ is becoming more of a lagging indicator and IMO it will continue to do so. But the public will continue to use it as a leading indicator until they have been hurt enough and it becomes obvious enough to them that this does not work anymore. As a gauge for how long this will take, think of the mice in a maze. Mice in a maze will learn more quickly than this crowd does. I ran into a couple prison guards at a restaurant bar who is on the "violence management" team on death row. They showed me their ids to prove their assertion. I asked them what is part of this "violence control". They told me this involves taking offending prisoners and having them meet "Mr. Cement". This is where they take the prisoner and repeatedly slam their face into the cement until their face is all bloody. This reminds me of the shorts in this bull market of earlier this year. The learning process is quite slow with respect to the public participant, and this always has been the case in the stock market. Note how money moves back into the segments of the market that were getting hammered yesterday? This is partiularly true with the NASDAQ that appears to be leading this rebound which may be more than just the result of normal trading activity. The market analysts yesterday were saying that the DJIA has allot of "catching up" to do with respect to the down markets that the NASDAQ has been experiencing. This underestimates the ability for the market to repeat its mistakes where the NASDAQ can regain some of its losses and make up some of that divergence we have been seeing between NASDAQ and the other indices. Also, when money moves from one market to another which was previously coupled with respect to their price action, they can become decoupled. This means at least for the forseeable future, the divergence between the two can remain in place. If the market continues up, watch more public money return to NASDAQ stocks. The public is very reluctant to get off their horse they have been riding through this bull market. There are posters on threads here at SI that about one to two months ago was anxiously asking each other: "Is it time yet to get back into tech stocks". If they are forced to get off their horse (face gets bloodied), then they are back on that animal at their earliest opportunity. Only when this approach to the market changes through a lengthy behavioral conditioning process is when the character of the market will change for the longer term. Just some of my cynical thoughts for the day. Bob Graham