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Strategies & Market Trends : Stock Attack -- A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: dennis michael patterson who wrote (19797)	3/6/1999 1:53:00 PM
From: Judy	Read Replies (1) \| Respond to of 42787

Even though the bond yield kept edging up, there was no real indication that inflation was a threat. If the market is truly a discounting mechanism, then the financial and banking sectors should maintain the uptrend inspite of the market choppiness. Moreover, if a bear market were to come upon us ... the financial and banking sector should be the first to recover. These sectors lead the market, up or down.

To: dennis michael patterson who wrote (19797)	3/7/1999 10:11:00 AM
From: Robert Graham	Respond to of 42787

First, here is another post I have recently made that I should of included with my post here on this thread: Message 8181887 I also have had in the past turned "moderately bearish" in my longer term stance of the market. What helps me in keeping my bias from affecting my judgement is I take that opposite view and look for evidence, particularly if I find too many traders sharing the same view with me. This is that contrarian...or cynic in me. Very useful skill when used properly. I usually learn something important about the market either way my research works out. I will now try to cover from memory some of what I saw unfolding in the market in the occassional glimpses that I afforded myself. Keep in mind that I have not been following the market closely. So part of this was intuition where I am recognizing the important from that which is not obvious. Apologies for what is going to turn out to be a long post. The first contrarian evidence I came across was the infamous "stair step" pattern that was being made by the DJIA. This usually resolves with strength in the direction of the broader trend. I then saw evidence of money moving from the NASDAQ into the DJIA and also out of the market to more secure positions. This made what I was seeing with the DJIA more significant. When the DJIA broke away from its stair step pattern, it entered a tight trading range interrupted by a couple test of its support, both support and resistance values being defined by the previous stair step pattern. I found this interesting since I had anticipated a breakout. While the NASDAQ was selling off, the DJIA was keeping up against its resistance testing its support twice to rally quickly back up against its resistance. In other words the DJIA was showing good relative strength in relationship to the NASDAQ and had in a very obvious way on the chart validated its support more than once. These were good signs to me. When I saw the NASDAQ in the process of bottoming, I examined some blue chip tech issues to find evidence of professional accumulation of the stocks. This was also a surprise to me for I epxected money to be moving out of this sector, cetainly not in. I also examined the market in the light of a series of negative news events that came out: first the Greenspan public announcement immediately followed by higher interest rate in the long bond, and then a series of analyst downgrades of key tech issues. In past markets that were ready to break down, these series of news event are all that would be needed to start a sell off in the market. To my surprise the market did not sell off. The market held together even when bellweather stocks broke down like INTC. I found this to be a surprise. This revealed a more solid bottom in the market which the market can then break out from. Even the DJIA and the broader S&P 500 index held together as the NASDAQ continued to sell off. So the sell off was contained by only a part of the market which is an important observation to market. Another key indication was market sentiment as revealed by the actions of the speculative day trader. One day came where even the public day trader stopped trading the Internet issues. Up to this point in time, there was negative sentiment during the sell off of the NASDAQ that was participated in by public monies. After the sell off stocks started to firm up. This was also when the turning point to sentiment occurred, but not before signs of extreme negative sentiment appeared to me. Here is where the most exuberant of traders, the day trader of Internets, was being cautious. At times in the past I did not think this was possible. The money that did move around in the market went to the blue chip techs for a quick play and also to accumulate these stocks at a good value. I see this as a type of extreme in market sentiment. No grease available for the skids to facilitate a market breakdown in the form of public day traders. Then further evidence came in of the market firming up. The technicals of the market were poor. However, money flow and sentiment indications and an analysis of price action told me of a different short term picture forming that can show up at a later time in the technicals. The market continued to trade under light activity. This is when the trader needs to be careful. Volatility under these circumstances can mislead their interpretation of the market and scare the traders out of the market or into selling short. Also the market can more easily be manipulated under these circumstances. But this is also when concern is at a high level by market followers. Each swing is seen by traders as significant in their attempt to make sense out of it. This is when you can uncover the people who are lost in the market. Then the DJIA made an attempt at a breakout. This was unsuccessful but showed promise by an improvement in some of the market stats. Next attempt made it through both the high of the false breakout and the 52-week high of the DJIA to end up as an all-time new high for this index. During this breakout, market stats continued to improve like market breadth and volume. Much of the same tech stocks that lead the former market are participating in this breakout including the blue chip companies like GE and even IBM. Another validation of this breakout to me, but not a validation of a sustainable rally. Monday will give us the first opportunity to see evidence of this, along with the follow up price action of the S&P 500. I hope this helps. Bob Graham