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Hi Fred,
Sunday, November 16, 2003, 4:59:11 PM, you wrote:
F> This from ~2 months ago ...
F> September 17, 2003
F> SAN FRANCISCO (CBS.MW) -- A fivefold increase in margin debt at
F> Nasdaq member firms prompted market data provider TrimTabs.com to
F> warn Wednesday that "the bubble is back" in U.S. stocks. Margin debt
F> rose to $26 billion at July 31 from $5.1 billion at Dec. 31 -- adding
F> $19 billion in June and July alone. That figure represents 15 percent
F> of the total outstanding, compared to 7.1 percent in March 2000.
F> TrimTabs' warning follows regulatory agency NASD's investor alert
F> Monday that trading "on margin" is up 25 percent year-to-date and
F> many investors may underestimate the risks. The NASD alert suggests
F> that Nasdaq members are being required to tighten margin rules after
F> a period of relaxation, TrimTabs said. "When a loosening becomes a
F> tightening, the affected stocks collapse. That is in part what
F> happened in early 2000 when the Nasdaq tightened margin requirements
F> on some of the more aggressive stocks."
Very interesting indeed.
There is also another "analysis" of the ^225 that might be possible
here. While we do have a very potential kind of "mini" H&S right
now, it's also possible that this topping action is all part of one
very large head formation of a rather larger-scale H&S that could
take quite a few more months to fully develop.
In this scenario, the left shoulder becomes early July instead of
late September. The "mini" H&S that some see now would then actually
be just one large and somewhat irregular head formation. The
implications of that might not be very pretty however. The neckline
of such a formation would be down around 9,225 (the July/August
pullback). Indeed, we might easily get a pullback to that level, and
then a substantial rise off of it in the coming months, which would
make a potential right shoulder by spring at the latest.
If the world liquidity, terrorist, currency, interest rate, etc.,
situations deteriorate next year, such a rally might be expected to
roll over to eventually test that neckline again. If that were not
to hold at that time, the implications would be for a potential 7,200
or thereabouts on the ^225 (minus 2 grand from the neckline),
something I really don't want to contemplate.
But if you look at RSI and the Nikkei, it's nothing but negative
divergence since that July high. Peak after higher price peak has
been followed by peak after lower RSI peak. The mini potential H&S
that we are seeing now has a right shoulder RSI *peak* of only 52, a
value near where "good" markets often hold at and reverse up from,
and a value about where "bad" markets often peak at. This was a peak
value, however, not a trough. I still have a bullish bias for the
next 6 months, but the road is likely to be rockier from here
forward, and as George said, "All Things Must Pass".
Best,
Yuki
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