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I generally concur with your comments with one exception. I believe a
hope of a Fed bias change led Tuesday morning's bond rally and the
failure to change bias resulted in the sell-off. Bonds are looking for
something/anything which will slow the after burners on both the stock
market and the economy. Given the strength of the speculative rally, I
consider the Fed's failure to change bias to be a strong expression of
concern regarding Y2K issues i.e. Fed Y2K intelligence indicates that
the problems will be more severe than anticipated by the public and the
markets.
I would also note that my NYSE and NASDAQ breadth oscillators are
improving slightly and the big/small cap spread is improving so we may
be seeing early signs of broadening. Overall, however the weekly breadth
oscillators remain in the worst shape they have been in at this time of
year in several years.
Earl
----- Original Message -----
From: Steven Poser <poserglobal@xxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Wednesday, December 22, 1999 6:10 AM
Subject: [RT] Re: [Treasury Bonds]
A drop below 90-22 on the March futures opens us to the 90-00 area. If
we do
not see a large and fast rally from there (which I slightly prefer to
take
yields back to near 6% again), we are in VERY VERY BIG TROUBLE. That is
bonds
could go straight to 6.75-7.00%.
I think the Fed made a mistake this time around in not changing the bias
although I suspect the market is missing the point. The Fed is scared of
bursting the stock market bubble and is trying to manage stocks so that
they
move slightly higher or slightly lower to prevent major dislocations.
This is
a feat that may not be doable. They felt, and possibly rightly so, that
changing the bias to tightening would cause the same problems as
changing
rates themselves (sharp drop in the markets just in front of Y2K). The
only
problem with that thinking is that the market already assumed that the
Fed
would: 1) Not change rates, 2) Change the bias, 3) Increase rates in
February
AND March.
Now, the Fed has signaled that it is SCARED of the stock market bubble.
With
that in hand, there is a CHANCE that the bulls just trample the bears. I
am
not sure that I really see this in the charts right now, but if we do
not
start a 5-8% correction real quickly, that is exactly what will happen.
Nothing has changed between yesterday and today (despite certain shrill
calls
for Greenspan's lynching elsewhere) as far as the Fed's policy goes. It
is
just the fact that stock market traders' are not based in reality. That
is
going to change by next year. I do not know if it happens now, in Q1, or
Q2,
but I will be absolutely amazed if the S&P 500 does not get very close
to, if
not below, 1100/1000 before 2000 is out.IT could see 1500/1600 first
though.
By the way, the idea that there will be blood in the streets is, though
not
impossible, about as likely as Al Gore getting a personality. Most
mutual
funds are little changed or down this year. The "smart money" is at
great
risk. But guess what, those are mostly the richest anyway. The average
"Joe"
is making a little or losing a lot right now in the stock market. If the
S&P
crashes, Wall Street will grind to a halt, consumer confidence will drop
and
the rest of the country will keep going. Most stocks are far off their
highs.
52-week lows on the NYSE are 5-10 times as large as 52-week highs on a
daily
basis. The "market" is not going up. CSCO, GE and a few others are
carrying
the indexes. The rich are getting richer and the poor are getting
poorer.
I would not be at all surprised to see market breadth stay steady or
even
improve as the stock market drops (if it does not happen in a panic). We
will
see lots of money lost, but as CSCO, GE, Red Hat, etc deflate, you will
see
some money start trickling into companies that make profits and have
fractions
of these valuations all over the big board. No, it will not be blood in
the
streets, it will be known as the year of the mutual fund manager that
beats
the index! And, Alan Greenspan will get his rightful place in history as
being
the man that THREE (1987, 1998 and 2000) times prevented global
financial
disaster and as possibly the greatest market thinker in history.
Steve Poser, President
Poser Global Market Strategies
http://www.poserglobal.com
"Dr. John Cappello" <jvc689@xxxxxxxxxxx> wrote:
To T-Bond Afficionados:
Need some insight as to potential bond price movement [direction and
range]
over the next 30 days as you see it.Just looking for some understanding
since some of the factors I used to look at do not seem to matter any
more.
Thanks for any info,
John
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