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BONDS
WERE HIGHLY OVER-BOUGHT, STOCKS WERE HIGHLY OVER-SOLD.
The resulting
short term correction exaggerated by earnings announcements and options
expiration and hyper-sensitive short stock hedge funds.
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<FONT face=Tahoma
size=2>-----Original Message-----From: topos8@xxxxxxx
[mailto:topos8@xxxxxxx]Sent: Thursday, October 17, 2002 10:51
AMTo: gannsghost@xxxxxxxxxxxxxxxCc:
wheelsinthesky@xxxxxxxxxxxxxxx; realtraders@xxxxxxxxxxxxxxx;
gannssquareofnine@xxxxxxxxxxxxxxxSubject: [RT] The Market's
Message- bonds and stocks<FONT
size=2>I think that the dramatic turnaround we've seen in stocks and bonds
during the past week is telling us something important. In my last
message (GG#17182, September 17), which outlined the implications of my square
of 9 calculations for T-bond futures, I said that short term calculations
called for a move to 114 but that it would be the last gasp prior to a
multi-week downmove of 6-10 points. The reason for the bearish intermediate
term view was that there was then long term resistance at 112-20 and
again at 113-20. In the event the bonds eventually got as high as
115-04 on October 8 at which point the higher of the two long term resistance
levels had risen to 114-20. The market took longer to establish its
highs and went further than my short term calculations led me to expect.
Even so, the high velocity break from 115-04 to 108-15 (so far) has
clearly broken the rhythm of the upmove from the March '02 lows and the 6-10
point break I anticipated is at least halfway completed. My best guess right
now is that a low will occur around 105. From there the market will
probably rally past 115 to the 120 level. I think the break in bonds
is telling us that the economy is not in as bad a shape as the constant
drumbeat of negative earnings surprises has led stock investors to believe.
In GG # 14651 (July 24) I said that square of 9 calculations showed
intermediate term support in the cash S&P at 781 and that the market
had begun a rally back to 1000 or a bit higher. (In the event it only
got as high as 966). I also identified long term support at 690 cash in the
same message. In GG # 16695 (September 4) I said that the 876
level should be the start of the second upleg to 1000 or higher. Instead the
market rallied only briefly to 925 and then dropped all the way down to 768 on
October 10. In the meantime, the long term support which had stood at
690 on July 24 had risen to 754. (I might add that my square of 9 calculations
showed long term support in the Nasdaq 100 in the 810 - 825 range so
these two markets appear to be on the same page in this respect.) The
strong rally in stocks from 768 on October 10 coupled with the postion of long
term support at 754 coupled with the big break in bonds makes it likely that
the stock market has just completed a successful test of the July 24 low. The
odds favor at least a move into the 1000-1050 range in the S&P. My
long term calculations suggest that this will actually be the first leg of a
bull market which will last for two years or so and carry the S&P up into
the 1200-1300 range. More on this last possibility in a later message.
Carl To
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