To: StockOperator who wrote (13201 ) 5/8/1999 10:22:00 PM From: StockOperator Read Replies (3) | Respond to
I have to say that this is one of the most perplexing market environments I have seen in some time. A comment that has been echoed on this thread quite a bit in the past week or so. What I find interesting about that is with the variety of analysis that is done on this thread many are coming up with that same conclusion. A few days ago I got incredible excited about a decisive turnaround that I witnessed across the board in many of the stocks that I follow. I got that excited because those reversals came at such a timely point considering many of these stocks are at such key positions right now. Many are poised to either break through consoldiating patterns or in the case of the internets (which have been badly bruised lately) made a decisive turnaround at what appeared to be a bottom. When you combine that with the fact that the indexes are NOW attempting to break into new highs as well, it appeared that the markets overall were about take it to the next level. I must admit in my own excitement I broke one of my own rules which is to wait until the close on Friday in assessing the week's performance overall. I say that because the latter part of the week saw most of those gains almost disappear, changing my initial read on things. But yet on Friday the DOW has started to break higher,,,the RUT closed at the highs of the trading range and will most likely attempt to break this resistance next week,,,the trannies also continue to inch their way higher. Plus when you combine that with the advance already seen during the past couple of weeks in the DOW and Transports and the fact that the NAZ last month broke through a three months consolidating period, the bulls should be very exited about the move we are beginning to see. I must admit however, that I am a bit worried. Worried enough to say that I would be extremely cautious heading into the FOMC meeting on the 18th. I would not be surpised at all to see a violent shakeout heading into that time period. First of all let me say that I do not believe the Fed is going to raise rates. But imo, what they do on the 18th has very little to do with what the bond market does between now and then. Rates closed on Friday at the highs of the week which definitely implies that the highs are NOT in. So in this particular case we have to worry more about the market's PERCEPTION or reaction to rates possible hitting the six percent level than what the Fed ultimatlely does two weeks from now. That initial reaction could indeed be volatile. Plus with the indexes beginning to break through these key areas you would expect to see the major players in those avgs also positioned to do likewise. This has been the disturbing part for me because the patterns so far have been ones that express more of a lack of conviction than anything. Actually patterns that could break either way (up or down). So I do think a sharp, sudden break is indeed a possibility. Of course I am not saying it is going to happen. But the possibility of a bull trap imo, has definitely developed. Please remember I am only saying this is a possibility and of course am not sure things will play out this way. It is just something to look out for during the next couple of days. Here are a couple of things to keep an eye on if the indexes continue their rise early in the week: I was going to say that interest rates should be your number one thing to watch, however, my gut tells me that prices will have already positioned themselves for a fall by the time rates make their move. In other words I would expect to see the markets move FIRST and then perhaps reverse prior to a big push in rates. So I would pay close attention to stocks like IBM which on Friday broke through a rising wedge and appears ready to hit new highs. If you see a big move in prices only to see a reversal at the end of the day start getting nervous. Also pay close attention to stocks like Chase and JPM that are sitting right at key support right now. Follow the action in AT&T which has broken through this consoldiation last week only to leave huge unfilled gaps along the way. Again watch for those major reversals. This strategy I believe will work well for the indexes as well.
