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

To: HairBall who wrote (13416)	5/10/1999 1:59:00 PM
From: wmwmw	Read Replies (2) \| Respond to of 99985

Most people on this thread only use technical tools, which are more useful in confirming a trend. FA is more useful in predicting a general market direction. The current market downside pressure is from bond action. I believe bond overreacted to strong economic number. There is no inflation. AG's speech had two important factors: 1. by law of supply and demand, low inflation can not go forever. 2. The fact is, so far still no inflation, which is attributed to high productivity. So how long inflation can remain flat depend on how long this high productivity can go. This high productivity can still hold long time because there is many technology breakthrough ahead us, the disappearance of internet bandwidth problems, audio and video real time transmission in internet, and technology progress in chip manufacture industry which will significantly reduce PC prices, and promote PC sales. A national wide and world wide internet communication will also further boost productivity. On the stock market, valuation is based on future production expectation, "greater fool" phenomena happen at times but is not the case right now. For the short term market direction I noted tow major phenomena: The down side pressure on bond and up side pressure on Dow. If you notice how bond reacted on economic number and AG's speech and how Dow reacted on bond prices changes. For past a few days, Dow acted strongly on its own direction, also affected at times downward by bond but a real big drop bond brought to Dow was on 5/4, down 124 points, but it was up over 200 points on previous day. So the 124 points drop included some profits taking. At other times Dow performed well, bond only slowed Dow's upwards trend, even bond reached 5.8%, Dow was still up. I guess if bond goes back to 5.5%, Dow will blow up immediately. If bond stay at current level, Dow will go first slowly then a little fast up. If bond reached 6% while no other inflation news, Dow may stay about current level with somewhat downside bias. But I feel 5.8% is the bottom on bond. There is no economic environment to cause bond to go higher. When every thing is settled down, bond will come back down and Dow will go up substantially. This is based on my belief that low inflation will continue in the predictable future, after my analysis on AG's speech and found it is really a neutral stance, and those economic numbers that showed no signs of inflation.