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Hi Ralph,
I will just make one submission with regards to your point re. Analyst
hypocrisy. The securities market regulator in India has reprimanded a
local subsidiary of a US securities house for selling stocks which
were being touted as buys in their worthless research reports. They may
well claim it is the "Chinese Walls" which segregates one
department from the other, however this to my mind is just another
instance of what you have termed so aptly "analyst
hypocrisy". Similarly another global securities house is under
investigation for allegedly colluding with an Indian broker to hammer the
market down.
Just two instances of how the game is being played.
Rakesh
At 10:13 PM 9/9/01 -0400, you wrote:
Tony Pylypuk:
You've developed some interesting arguments around a 100 year chart and
the behavior of world indices to respond to my past posting. However, I
fundamentally disagree with the principles you base your arguments on.
For example, I have found that lines can be drawn anywhere on a chart to
prove some point, but it's always fact finding after the fact. To trade
on your information alone would be very dangerous, as I have found out
many times before. As for past similarities, I can't tell you how many
times I've heard of impending doom and gloom after the crash of 1987 and
all we've seen is the most spectacular bull market ever. If you check out
1987 on your chart, it appears like a minor blip now and makes the fear
mongering at the time laughable. Finally, the once respected Robert
Prechter, Jr. uses a similar approach to yours, and he's been wrong for
the last 13 years. Buy the way, the Elliot Wave approach that Precther
espouses also accepts a fourth wave penetration of major support as a
means of propelling prices higher. These penetrations are very common. In
fact, professionals push violations of major support as a means of
triggering sell orders that they'll buy up.
You also spoke of a break in a diamond formation in the Dow. This is
something I also noticed, but when a diamond formation is broken, prices
should slide dramatically. That didn't happen! I equate this to a failed
head-and-shoulder. If there's a weak neckline penetration and price
rebound, it's a clear signal that a significant move higher is very
probable.
Another point you made was that the Dow was somewhat protected from rapid
erosion since it harbored money that was fleeing to quality. Well, that's
fine, but in the 18 months of this decline, the S&P has only declined
by 30% when 38.2% is considered a normal first-stage correction. Yes, the
NASD has declined by a little over 61.8%, but that's within a normal
correction range after such a huge run up. If you also were observing
market action on Friday, many of the tech stocks were in the green even
though the Dow was off 200 points. If you want a sign of a reversal,
that's one.
Let me take this discussion in a slightly different direction --- a
discussion of fundamentals and analyst hypocrisy. First, when interests
rates plummet as they have, CDs and money market funds are poor
investment choices. The only good investment is the market. Also, as in
the past, the US markets were a magnet for huge amounts of foreign
cash as investors sought to protect their capital. This was a great
impetus to our markets.
From an analysts standpoint, I can remember when low inflation, higher
worker productivity, and staff cutbacks where a plus for industry; and I
don't think it will be long before all these arguments swing back into
vogue. As for Friday's high unemployment news, I remember when this
market first took off, an unemployment rate of 4.9% then was a wild dream
and actually thought of as an industry burden since it limited the
quality of hires. Also, how many times have you heard: " the market
climbs a wall of worry?" When everyone sells in a panic, that's when
smart money flows in. Remember, there is a buyer for every seller. So,
who's is doing the buying? OK, the buy side is discounted but that's
because market insiders have created a fear scenario, which they can turn
around quickly by easily manipulating the media.
I conjectured a counter correction at this point that would carry the Dow
to a possible double top by the end of October. This would mean a
top-to-top span of 21 months. However, I don't expect the NASD or S&P
to come anywhere near double tops.
I'm sorry for this long post, but your stimulating post and a quiet
Sunday evening are mostly to blame.
Ralph
Tony Pylypuk wrote:
Ralph,
I suspect it may have been my 101 year INDU chart (or Earl Adamy's S&P chart from 1928 forward) which caught your attention.
Without meaning to speak for Earl, I offer the following response to your comments.
First, the century-long support line on my INDU chart is anchored on only two points. Accordingly, although the distance between any two points is by definition a line, the century-long support line is without the confirmation which would be provided by one or more retracements to and rebounds from the line. Even so, the line which I have drawn is steepest support line which holds all the data from the 20th. and 21st. Centuries on a semi-log or arithmetic chart of the price data.
etc.
Tony Pylypuk
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