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<p class=MsoNormal><span class=EmailStyle15><font size=2 color=black
face=Arial><span style='font-size:10.0pt;font-family:Arial'>Has anyone coded
any of <span style="mso-spacerun: yes"> </span>Larry Williams stuff for
MetaStock?<o:p></o:p></span></font></span></p>
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</x-html>From ???@??? Wed Apr 05 07:27:31 2000
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Date: Tue, 4 Apr 2000 21:43:08 EDT
Subject: [RT] FUTR: A Crash and Recovery In The Same Day; Follow The Money
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Status:
Today's and this week's wild market activity in the stock index futures is an
interesting gauge of our perception of risk in the marketplace. The
divergence between the S&P and Dow versus the NASDAQ has me thinking about
one of the old trading maxims I learned along time ago; follow the money.
Back in 1987 the Dow dropped over 500 points in one day, a market crash.
Today the Dow dropped by over 500 points at one time during the session, and
then recovered most of those losses. Not the same risk level in terms of
percentages, but in points. It was a reminder to trade smaller, a point I
made in a recent post.
Following the money tells me there is demand for Dow and S&P 500 stocks and
bonds, components of a traditional conservative balanced portfolio.
Following the money also tells me there is an excess supply of NASDAQ stocks.
One commentator on CNBC today talked about how many of the lookups for
insiders on some of the high flying Internet stocks have recently ended and
that new supply is available to the market. More supply than the market can
handle.
Two thoughts occurred to me about this. One is that some say the inflation
that we have seen has come in equities and some of this value is being
exchanged for cold hard cash. I know that I have reduced our mutual fund
holdings for my family and enjoyed some of the fruits of riding the
technology stock surge of last year. Projecting a little, I would suppose
that if I were a newly minted technology millionaire and had the chance to
grab some cash amid the market volatility we are experiencing, I might just
do that.
Secondly, many of these technology stocks with little earnings and idea-based
valuations are similar to futures contracts. There is a long time from
August to February for Pork Bellies. Often, Feb. Bellies can have wide
swings, which have nothing to do with cash market valuations. Delivery and
the day of reckoning for Feb. Bellies are afterthoughts to traders in
October, November and December. Once delivery comes around, it becomes a
different game. At delivery, fewer speculators are willing to hold the long
positions, and there is more commercial concentration among the players.
With the lockups on some of the technology high fliers ending, and more
supply available to the market, new valuations are forthcoming based on who
wants to really hold these stocks. Insiders would be foolish not to lighten
up and diversify their holdings in this volatile mania momentum driven market
with increasing volatility.
Diversify the holdings. Lighten the positions. Go to cash. Follow the
money. To me, following the money says to move money from NASDAQ to broader
market baskets, put some money in bonds and take out some cash. Or put
another way, move some money out of greed and reallocate it to fear.
New money may have made their money in brash new innovative ways, but old
money hangs on to its money the conservative diversified way. Maybe new
money is taking a lesson from old money.
Regards,
John J. Lothian
Disclosure: Futures trading involves financial risk, lots of it!
Disclosure: John J. Lothian is the President of the Electronic Trading
Division of The Price Futures Group, Inc., an Introducing Broker.
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