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To: donald sew who wrote (46959)	6/27/1998 2:01:00 PM
From: Robert Graham	Read Replies (2) \| Respond to of 58727

Here is some thoughts about the market FWIW. The market has established for itself a wide trading range. If it is near the bottom and the market shows strength to the upside in its trading range, which is possible in today's volatile market with program trades and hedge fund activity and now for this market adjustment and consolidation even funds moving large amounts of money around in very short term positions, then this type of activity can fool many into thinking that the big rally has arrived even though this may still be a trading range market. The following reasons is why I would take the determination of a longer term rally with a grain of salt at this point in time. Like Donald mentioned, it is window dressing time which can skew results. Also the funds are moving into the NASDAQ not based on an interpretation of the broad fundamental picture of industries as they do with their normal sector rotation, but that the NASDAQ due to the previous and still fairly recent selloff is undervalued from where it has been in the past. I see funds take this type of this more technically based position as temporary holding areas for their money until the market bottoms and they can find a place for their money that is based in a large part on their future fundamental expectations of industries. Having positive earnings that come up as earnings surprises on the heels of a pattern of good earnings growth helps stocks go up over the longer term, rather than companies meeting earnings consensus that have been adjusted down to reflect no or little earnings growth, where the market is very anxious and looking for an excuse to get in. The mutual fund game is so competative that the funds cannot keep their money to the side lines for long. They must keep their money working for them. IMO this adds to the upside potential over time until the market changes in some fundamental way to the downside for the longer term. This mini-rally happened on the heels of the hedge funds taking the market up from new lows. Keep in mind that we have ended up with continued earnings warnings and disappointments in the high tech sector for last quarter's results along with low earnings growth for many key companies. Third, we have not even decisively broken through index highs, and with the DJIA, its important 9000 mark. So I do think it is a bit premature to call this the resumption of the market rally that had started at the beginning of this year. IMO lower lows are definitely possible until the market has show a consistent and broader pattern of strength and higher highs and higher lows. For that matter, the broader pattern has been of lower highs and lower lows. This market volatility can deceive the market follower. IMO considering this market environment, a turnaround has not been validated but it is looking promising. Still, there are some very positive signs for a possible longer term market rally. There has been an apparent shift in sentiment by the fund money to make this substantial move back into the techs particularly considering the markedly eroding fundamental picture and selloff that happened in the not too distant past. Fund money in a significant way is participating in this rally which will can give it legs. Even though the funds money has in a major way moved into NASDAQ stocks, the S&P 500 has moved to a new high. I am sure the public will magnify the effects of this large placement of money and help carry the rally. New highs have been made by key indices and this rally has been with surprising strength and breadth. However, IMO the A/D and the new highs to new lows measure still needs some improvement to validate this strong rally. Also considering the lows that the market has visited in the recent past, I think there is some basing to be done which may happen in the near future. I personally do not see evidence right now that this market action is part of a "blow off" top. IMO this has been more of a rounding top with significant volatility coupled with a widening trading range with basically two levels: 8750 to 9000 and 9000 to 9350. Right now we may be entering the higher of the two levels. And the NASDAQ has transversed a lot of ground quickly from the bottom it made about two weeks ago to still end up below its high. And the high hit on the S&P 500 is still tentative at best. Note that I mention fundamentals in the broader market picture. Funds do respond to their fundamental view of industries as an important element to their selections for sector rotations. Also when the market is bullish on stocks, it does help quite allot if their participation is met by positive earnings growth and earnings surprises. So a positive improving fundamental outlook increases the opportunity for positive news events to be reported which does have its near term effect on the market. A pattern of negative fundamentally related news events gives many opportunities fo the market to selloff. All that is needed is for the sentiment of the market participants to change from bullish to negative during a bull run of the market. So even though earnings growth may not support a bull market that still continues up to many people's surprise, multiple quarters of negative earnings growth and earnings disappointments accompanied by a substantial downward adjustment of the consensus estimates on stocks followed by continued poor earnings growth can continue take its toll on the market. Do not let the earnings surprises that have been reported over the past couple quarters fool you. The basis of that earnings surprise was little or no growth in many cases. The fear of inflation still remains and there is the problems with the Asian economies still with us. This is my qualitative view of the market. When I have time I will look at a more quantitative technical view of the market. So I think this rally should be considered of short term duration for now. Oh, and there is one industry that will continue to benefit from this market: the brokerage businesses. Comments are welcome. Any thoughts? Bob Graham

To: donald sew who wrote (46959)	6/27/1998 4:27:00 PM
From: Dwight E. Karlsen	Respond to of 58727

Don, thanks for the analysis. I've been thinking along the same lines. My primary concern is simply that this explosive move was not triggered by a fundamentally positive change. It started as a technical rebound by MSFT, which had built a base. MSFT move was fueled by court decision in favor of MSFT, imminent release of Win98, etc. Net stocks were also fueled by an event, which was investment by big old-line media firms into the so-called portal companies. But take a look at how positive this is for SEEK, for one example. SEEK investors are not happy, and SEEK management has had three conference calls with analysts and investors to try to explain how this is good for SEEK, with another CC scheduled for next week. Considering I went short the SPX with puts at 1106, I feel fortunate to have survived the week with "only" about a $600 loss from that position. I rotated first into RIG calls, but sold for a 3/8 of a pt loss, and rotated into AMZN puts, which are currently up 25% and 27%. Dollar-wise I'm still in the red for the week, but at this juncture I'm happy to be still short. Will be looking to for more short candidates next week.

To: donald sew who wrote (46959)	6/28/1998 3:34:00 PM
From: Nancy	Respond to of 58727

Don, something about VIX - need to see the formula how VIX is calc. but from past readings, either an extreme in call prem or put prem will skew its result and render its prediction useless. somewhere way back in Feb/Mar period I believe Barron mentioned about the put prem was consistently high and call prem was consistently cheap even market was rallying up. My gut feel was people got burnt in late 1997 and stayed skeptical of the renewed rally. last 2 weeks I checked some calls and found them very expensively priced while the puts were cheap - so that may have affect the VIX value. Again, need to know exactly how VIX is being calc to be able to get a sense of it. NDX - MSFT, INTC, CSCO, WCOM, DELL together made up almost 60% of NDX - so you cannot effectively compare NDX's advancement with others. nasdaq.com I am sure if one can customize a top SPX 20 index, one can see it far outperform other indices as well.