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

To: Robert H. who wrote (26760)	9/7/1998 8:40:00 PM
From: yard_man	Respond to of 94695

Strongly disagree, market can't be and won't be unwound slowly -- yes it will be attempted, but it won't happen. You've seen the upward crashes in the past few years and the most recent -- Greenspan and Rubin are both in a terrible fix now -- the government can buy all the S&P futures it wants -- lotsa luck to them!

To: Robert H. who wrote (26760)	9/7/1998 9:22:00 PM
From: BubbaFred	Read Replies (1) \| Respond to of 94695

Which way will it go? Here are my thoughts. AG finds recent stock market crash and SEA/Latam/Russia events are deflationary pressures that will offset domestic economy inflationary pressure. FRB is in ideal situation to play this out as long as they can, and engineer a soft landing. From AG's previous warnings of Asian impact, that deflationary pressure will arrive. In the meantime, the Feds can buy time to see which which pressure will be stronger. Unless stock market drops precipitously again and SOON, FRB would be happy to remain status quo. Perhaps, a 1/8% rate cut would suffice to buy time and ensure reasonable stability. By comparison, Bundesbank's Tietmeyer stated that "...Germany was still a safe haven from global financial market turmoil but added that the situation could rapidly change if mistakes were made." This guy is even more stringent and austere with their monetary policies, and he is no pushover. biz.yahoo.com Latam and SEA's first priority is to scream for lower US rates in order to increase liquidity, and allow banks to make more bad loans. SEA wants to see more U$ loans and credit because it's bread and butter of their economies. All these emerging countries want to see high worldwide inflation and lower US dollar, so their loans can become cheap money. (Those rascals - can't control their economies and expect Uncle $am to bail them out every time.) So here are three possible scenarios for the stock market: Scenario No. 1: Trading range from 950 to 1050 S&P for the next 4 to 6 weeks. This will allow the deflation/inflation pressure to work itself into the system gradually. FRB my lower rate by 1/8% soon, half of what everybody is crying for, and which will have minimal impact on the U$ dollar. That will put a damper on US stocks from getting frothy again, and just as AG likes it. This will give time for the S&P chart to form a base (and also develop the right shoulder of a head and shoulder formation), within the downtrend channel until October, time for the next flurry of negative earning reports. Note that the aftermath of a head and shoulder formation is usually very wicked. Reasons for short term rally: (a) Expectations of the wondrous things that the rate cut will do. (b) The majority of people who have their 401K plan in stock funds are complacent because they think the market already reached bottom and who are willing to do nothing, as they have been told by financial planners to look over a 5 to 10 years horizon and not worry about daily or monthly fluctuations. (c) New money will be going into the market, thinking this is the bottom and time to get in. All these will be the impetus for S&P to go to the 1050 resistance line. Reasons for limited rise and higher downside risks: (a) Disappointing news of continuing Latam financial crisis. (b) AG will not like to see a breakout and frothy market, specially in this environment that is very susceptible to another and much bigger crash next year. (c) Realization that rate cut of 1/4% may have little impact on earnings, nor helpful to those SEA and Latam economies. (d) More companies will be pre-announcing lower revenues and profit. Scenario No.2: The market will churn within 50 S&P points for one or two weeks and the downslide will resume. Reasons for churning the 50 S&P pts: Enough time to take out the oversold condition (daily stochastics). Reasons for further downslide: Devaluation news from China and several more Latam countries. More companies will be pre-announcing lower revenues and profit. Downslide will be confined within the downtrend channel. Lowering the rate will cause the U$ dollar to plunge and foreigners selling out US investments. Scenario No. 3: Rebound and turn bullish again and breakout above S&P 1100. Signs of stabilization in SEA and Latam, and rosy scenarios 2 years down the road. We are back to dreaming of worldwide prosperity and economic recovery. FRB becomes reactive and cuts rate by 1/4% and then promise to cut by another 1/4%. U$ dollar falls and become cheaper, and it is time to say hello to bad loans galore. Inflationary pressure comes into play and money going out of bonds and goes back into stocks. Put out the welcome mat for hyper inflation year 2K.