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<DIV><FONT color=#000000 size=2>Earl, half of me agrees with you, but the other
half thinks that the drop in bonds, utilities, and the dollar are all symptoms
of the fact that the "smart money" is beginning to feel that the
global economic crisis has bottomed out. Money flooded into all
three of those assets last summer and fall when the skies were darkest, and I
think we may just now be seeing the fear money being allocated to more
aggressive investments (such as Asia, as you pointed out). I have trouble
believing that this is the start of a long term bearish trend for these
assets.</FONT></DIV>
<DIV><FONT color=#000000 size=2></FONT> </DIV>
<DIV><FONT size=2>Once all the fear money has left, I think the bonds and
utilities will resume their bullish trend (the dollar is more up for
grabs...). The federal government makes (I think) about $250 billion in
interest payments every year to treasury bond holders. Up until now all
that money has essentially been used to buy new debt being issued by the
government, but with the budget now in surplus, that money will now go chasing
existing debt. The laws of supply and demand say the price of bonds must
go up. If the government additionally uses the surplus to retire existing
debt, that just puts even more upward pressure.</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>It all may just be a question of timing. One can
only speculate as to how long it will take for all the fear money to exit the
bond market, so the bull market can continue. The good news is that during
periods such as this, when the underlying fundamentals are pulling in different
directions, technical analysis tends to work the best!</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>Bruce</FONT></DIV>
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<DIV><FONT face=Arial size=2><B>-----Original Message-----</B><BR><B>From:
</B>Earl Adamy <<A
href="mailto:eadamy@xxxxxxxxxx";>eadamy@xxxxxxxxxx</A>><BR><B>To:
</B>RealTraders Discussion Group <<A
href="mailto:realtraders@xxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxx</A>><BR><B>Date:
</B>Wednesday, February 03, 1999 8:49 AM<BR><B>Subject: </B>Re: Market
Trend, continuation of bear begun in April 98<BR><BR></DIV></FONT>
<DIV><FONT color=#000000 size=2>You may have missed the early indications of
rising interest rates: DJ utility average has broken down severely after
failing to complete a full thrust to upside and bond futures also failed to
complete full thrust to upside and have moved into a down trend. The yield
curve is rather flat through bills and notes so it's hard to get a reading
on how yields will change across the curve, however I expect we'll see long
bond at 5.6-5.7% and a healthy rise in the intermediate sector of the
curve.</FONT></DIV>
<DIV><FONT color=#000000 size=2></FONT> </DIV>
<DIV><FONT size=2>I'm not a fundamentalist, however my suspicion is
that the 3 Fed rate cuts have so stimulated the US economy that rates
will move out of the 17 year downtrend in rates into a flatter range between
4.75-5.75. Obviously, US rates can not get too far out of whack with
overseas rates, so continued weakness in European rates should tend to
mitigate the extent of any US rise. We are seeing numerous signs pointing to
a bottom/turnaround in Japan and Asia including a near doubling of long term
rates in Japan. What will be interesting to observe is how any rise in US
rates will affect the US equity market - higher rates will drive the
TBill/Earning Yield ratio even higher into the danger zone unless PE's or
prices begin contracting; however the public appears to be oblivious to
multiples.</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT color=#000000 size=2>So far, equities have shown signs of
consolidation rather than decline. We haven't even tested the s&p 1200
area much less support for a normal correction in the 1170 area (all prices
basis March futures). We would would need to take out the 1147 low of 12/14
before I would entertain the thought that the well-formed, 7 month, cup and
handle (very bullish) in the s&p is failing. Also, the Amex
broker/dealer index, a good leading indicator of major market declines, has
yet to show signs of a breakdown. I don't in any way disagree with points
regarding breadth (a/d and h/l) or sentiment, however divergences like this
can last a very long time. When these divergences develop, one needs to
stick with the price action and wait for the real price failure to develop.
We may be in the early stages and we may not. I've been seeing some very
strange price action on the 9 and 45 minute charts, however the past 10 days
has provided higher highs and higher lows on the 45 minute chart so even
here, we must take out 1223 and then 1210 before the price picture turns
negative.</FONT></DIV>
<DIV><FONT color=#000000 size=2></FONT> </DIV>
<DIV><FONT size=2>Earl</FONT></DIV>
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Date: Wed, 03 Feb 1999 23:38:39 +0000
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From: Jonathan Stewart Dempster <aceit@xxxxxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: Futrs: Trading Stops/Risk/reward
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group, does anyone have any comments regarding stops and risk reward
ratios,
So the lessons begin,.
im looking at intraday time scale, now, example i focus on the ftse 100
index and lets say the daily average range is 100 point low to high,
what is a realistic target one can expect to achieve (i mean % of the
days range)
Ive read somewhere that "great " traders manange between 20% of the days
range..
Results of 3 trades,
1) ahead 56 points, market moved lower, i broke even, i was thinking of
concepts on that one of where the price would go to and the concept was 20
points or so higher than the 56 for the day (but that never happend) dow
opened + 50 and slumped, triggering a sell off in the uk,
2) ahead 36 points, again my thoughts were higher, result loss (50 points)
3) ahead 32 points ditto number 2 trade,
maybe when i hear myself saying " its going higher i should exit" :)
I know i must cut my risk to 20 points or so, but im interested to here
how others play it....
so im looking to hear from people regarding their knowledge gained so far,
example if you are trading the sp 500 and the range is 18 points how
many points do you risk personally 1-2 to make 2-4 how much room to you
give yourself?
Any comments? J.S.D..
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