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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: James F. Hopkins who wrote (2874)	12/26/1998 1:38:00 PM
From: StockOperator	Read Replies (2) \| Respond to of 99985

I spent some time yesterday with a friend who daytrades the S&P. He is very excited these days because of a new system that his broker turned him on to. He is always fully invested either long or short, and has gone from being a daytrader to more or less a position trader. His outlook is still short term but his time horizon has been extended somewhat. I guess he's had great success the past couple of weeks having been long the market. At the end of the day on Thursday his system went short. Of course, before I could get any more info. on how his system works, our wives dragged us out of his office. I don't blame them, it was Christmas. The reason I'm sharing this story with you is because being exposed to other traders such as my friend or the many posters on SI can only make you a better trader. We all develop over time methods that fit our personalities. But in sharing those methods with others it causes all of us to take a harder look at our own work and the conclusions we come up with. Which brings me to where I think this market is going. We all know there are some serious divergences in the numbers. The NAZ and S&P have broken out to new highs while the other averages have been languishing behind. On the surface this makes a good case for how unhealthy this advance has been. But before I'm willing to write this market off I want to take a closer look at the charts for those lagging indices, and more importantly the charts for those companies that make up those averages. Are they're stock prices breaking down? Or maybe the reason the indices are lagging is because those charts have been in consolidation patterns, and haven't broken out yet. I've been long this market during this recent rally, but reading some of the posts from the last couple of days as well as talking to my buddy made me take a good hard at my own work. And I have to say that I'm more bullish now than even a few weeks ago. I think the Russell is getting ready to take off in a big way. Many of the small companies that I follow have charts that are ready to explode. Besides, the charts of all the big players (CSCO,IBM, Internutz) are not breaking down. Granted a short term pullback would be very healthy for some of the stocks that have already made big gains. But I definitely wouldn't short anything here. With the market broadening out this can only mean much higher prices are in the wings for all the averages. My prediction is January and 1999 will be the month and year of the small cap stocks. The good thing is we won't have to wait long to see if I'm right. Good Trading StockOperator