Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Tech Stock Options -- Ignore unavailable to you. Want to Upgrade?

To: HairBall who wrote (57752)	11/18/1998 2:32:00 PM
From: ViperChick Secret Agent 006.9	Read Replies (2) \| Respond to of 58727

someone just told me that including this post...since midnight there have been approximately 15 OFF topic posts..only two of which are mine.......and that includes this one

To: HairBall who wrote (57752)	11/18/1998 5:12:00 PM
From: Dell-icious	Read Replies (3) \| Respond to of 58727

Thread: interesting article from today's WSJ: 'Two Tumbles and a Jump?' Stop Your Laughing and Buy By DAVE PETTIT THE WALL STREET JOURNAL INTERACTIVE EDITION Alan Greenspan and company did more than cut interest rates on Tuesday. They signaled the start of an explosive stock-market rally -- at least, that is, to adherents of Wall Street's so-called two tumbles and a jump rule. Two tumbles refers to interest rates and the jump is the market's reaction. If the believers are right, the Dow Jones Industrial Average could be flirting with 12000 at this time next year -- up roughly 30% from its level now. Two tumbles and a jump holds that explosive gains follow in the stock market any time the Federal Reserve changes direction on rates, and moves twice consecutively to ease credit conditions. Tuesday's "buy signal" was made by a quarter-percentage-point cut in the discount rate. (Cuts in the federal-funds rate target, adjusted three times in seven weeks, don't count.) The discount rate is the rate the Fed charges banks; the fed-funds rate is the rate that banks charge each other for very short-term loans. Norman Fosback, the Dearfield Beach, Fla., newsletter editor who came up with the two tumbles rule in the early 1970s (he can't recall precisely when), said the stock market, as measured by the Standard & Poor's 500-stock index has gained an average of 29.7% for the 12 months following each one of these buy signals. There have been 19 signals triggered since the Federal Reserve System was formed in 1913, and the market has risen 18 times, he said. The one exception was the buy signal sent out by the Fed on Nov. 15, 1929. "Just after that signal, the market was up 28%. But as we know, it subsequently crashed lower and led to the Depression," Mr. Fosback said. He doesn't expect any such disaster this time, and notes that a 30% gain is historically significant. Although investors have come to expect some pretty heady annual gains in stocks lately -- the Dow Jones industrials have jumped more than 20% three straight years through 1997 -- the average stock market gains each year is between 7% and 8%. "This is a big signal. You'd have to say it's pretty significant," Mr. Fosback said. Others on Wall Street have taken notice. Don R. Hays, market strategist at Wheat First Union, sent a note to clients about the buy signal early Wednesday that began: "I love Alan Greenspan." (The phrase was in all capital letters -- and was followed by 11 exclamation points.) Mr. Hays advised clients "to get bullish" and make investments in stocks that have long-term potential. One favorite area is biotechnology, he said. Still, Mr. Fosback's two-tumbles rule clearly wasn't taking Wall Street by storm. The stock market posted losses through much of the morning Wednesday before rebounding during the afternoon. Most investors, it seems, are far more familiar with the converse of the two-tumbles rule: "three steps and a stumble." Developed by the late Edson Gould, a legendary technical analyst, it predates Mr. Fosback's work and holds that the market will fall after three-straight interest-rate increases. "I've never heard it put that way," says Richard Scarlata, director of research at Sutton Financial Services in Chicago, of Mr. Fosback's two tumbles. "But I agree with him. I'm on his side." A spokesman for the Fed didn't immediately return a phone call seeking comment.