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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: bobferg who wrote (17960)	10/9/1998 11:44:00 PM
From: Suresh	Read Replies (1) \| Respond to of 68737

Hi Bob, along with EPC do you follow change in OI ? For eg; yesterday when put to call ratio was greater than 1, call OI was 13.24M, put OI was 9.21M (this includes both equity and index). Todays call OI is 13.63M and put OI is 9.36M. So essentially more call positions were opened yesterday than put positions. So, most of the option players seem to be playing the game in the right direction... Regards, Suresh

To: bobferg who wrote (17960)	10/11/1998 10:41:00 PM
From: Tom Trader	Respond to of 68737

Hi Bob re >>I would appreciate any thoughts you may have on Mr Market If the issue of hedge-fund exposure were not a major question mark, I'd say that my outlook for the market was for limited downside--by which I mean about 5-7% from current levels. As I have made investment decisions in relation to my funds a question that I have often asked myself is the probability for a move of 10% in either direction in terms of the market -- in other words do the odds favor the market moving up 10% vs moving down 10% at any point in time. It is this type of evaluation that has caused me to move almost completely into cash from time to time--most recently in August/September 1997. Using this criteria, were it not for the factor relating to hedge fund exposure, I'd say that the situation is somewhat balanced at this juncture with perhaps a bias to the downside. The thing that is complicates matters considerably is how the whole business of hedge fund exposure and other external factors will play out. I was shocked by the magnitude of the move in the bonds and currencies during the past few days--and given that this has been ascribed to a combination of hedge-fund exposure and related factors, what is abundantly clear is that one might see very exaggerated moves if the there is forced liquidation by entities who have exposure to the long side of the equity markets. Unfortunately, I don't think that anyone has any sense of the magnitude of how much exposure exists because of this factor though it appears that given the way that the BKX has acted, the situation may be worse than is immediately apparent. From a fundamental stand-point the general feeling is that the US economy is at best going to have anemic growth and at worst a mild recession--based on the prevailing wisdom. Despite the much bally-hooed impact of the Asian contagion, the information that I get from sources in Asia, who I consider to be reliable in relation to the business environment there, is that the worst is over--unless Japan implodes. Now this does not take into account the likely impact on the US economy if the contagion spreads to Latin America in a marked manner. Given that current multiples on the SPX are still very high -- based on historical precedent -- there is still the assumption that the impact on the US economy will be limited and if it turns out to be otherwise, the damage to the averages will be severe. Based on contacts that I have had with former associates in the business world, the feeling is that the impact to date and over the next year on profits will be limited--however these are people who are in sectors whose exposure to the international markets is quite limited. Technically the market is in pretty lousy shape -- and would argue against committing funds to equities at this point. Notwithstanding the Dow holding its own last week, all the other averages have been savaged and specific stocks and sectors have seen the type of devastation that is not reflected in the averages. From a sentiment stand-point there are mixed signs--bearish sentiment is high though the percentage of bullish advisors are not yet at a point that one would equate with a firm bottom. Insider buying is looking very good with heavy buying occurring in the sectors and companies that have been most beaten down. I consider systemic insider buying to be one of the best indicators of a bottom forming during serious down-trends. It has happened at every major bottom, in the last 30 years or so based on data that I have seen -- however, an important caveat is that such insider buying can continue for several months while prices continue to decline. Finally, specialist/member shorts are still at bearish levels and would seem to argue that we have not seen the bottom. BTW, I have ceased to use the EPC at this point, though I do still track it--it seems like the usual bench marks are not working at this time. Quite honestly, if it were not for this hedge fund issue, I'd be committing funds to the market at this point--albeit, in a guarded manner. I am still trying to see if I can devise an approach to do just that -- and guard against any catastrophic decline. I am talking investment positions as opposed to trading positions when I refer to committing funds. For now, I have been trading the markets on both the long and short side--primarily through the use of OEX options. However what I have been doing is to write naked puts and calls and strategies entailing short straddles and various types of spreads. The richness of the premiums makes this very enticing--though I realize that it is hardly suitable for everyone. I have been extra-ordinarily successful to date doing this and for the past 2-3 months have enjoyed exceptional returns. My futures trading in the S&P futures, using a mechanical system, which had been doing incredibly well -- has gone through several severe losses and been whip-sawed. The system remains short from the 1053 level though I am at this point flat. The only one on SI--among those whose postings that I follow -- who has done an incredible job in calling the turns in this market is Don Sew -- I don't know if you follow him but if you don't you ought to book-mark him. He is by no means right all the time--but he is clear in terms of what he is saying and expecting and when he is wrong-- which more recently has not been too often-- he has no problem acknowledging it. Hope all of the above is of some help and has not added to the confusion. Regards