Next week is crucial for the stock marketgreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
The Dow is now at a critical juncture, both in terms of price and timing. It is well below the Comeau pivot point of 11,569, and is near a key support level for the Dow. Many "mainstream" financial newsletters use a 200 day moving average for determining buy and sell points. A simple 200 day moving average gives 10,870 for the Dow and an exponential series gives 10,697. The recent drop in share prices probably was steep enough to trigger at least some margin calls going into tomorrow's opening. If the FED needs or wishes to prop this market up, this is time and place because there is little support below until about the 10,000 level. The market is vulnerable on this first wave down at least until 5 Feb., the solar eclipse. This market is heavily manipulated by the FED, and big players, so any market moves are not necessarily "pure" financial reactions to the economic fundamentals. With this proviso, it is entirely possible that a 1929 or 1987 type crash can happen soon, a drop of 15% to 23%. I urge caution if you are still in this market.
-- Sure M. Hopeful (Hopeful@future.com), January 30, 2000
OK, you've got my curiosity up. What does the solar eclipse have to do with the stock market?
-- ????? (firstname.lastname@example.org), January 30, 2000.
Thanks, I'm glad I'm out, I'm glad I'm in commodities [i.e. real stuff, not "promises to pay"...] . Waiting and watching...
-- Andy (2000EOD@prodigy.net), January 30, 2000.
Please educate me/feel free to correct - I profess to be no expert at this stuff.
Others have said that Comeau's pivot point of 11569 has already been surpassed thereby voiding that theory. In other words, the Dow should have "pivoted" at or shortly before that point and then plunged. It did not happen, rather it continued on up.
In 29 we had the Dow. Today we have 3 indices. The Dow is close to intersecting with the 200 moving average, but the Nasdaq is far from it and the S&P has a little ways to go yet. I has been stated that the Nasdaq represents the true reflection of our economy because it has more tech stocks in it.
Your comments please.
-- ilander -- (email@example.com), January 30, 2000.
By the way Hopeful,
I do agree that this week and next week are crucial for the markets, but for other reasons.
-- ilander -- (firstname.lastname@example.org), January 30, 2000.
Do you mean the solar maximum, which COULD affect power, which in turn could affect the markets?
I don't see how a solar eclipse could affect the markets.
-- Connie (email@example.com), January 30, 2000.
I totally agree with you that this next week is critical for the market indices. However, there is another scenario possible: It may meander listlessly for a while, then take off (upward) again.
Nothing would surprise me about this Market anymore. We live in a strange, new time. This is a strange, new Market.
For all I know, we'll wake up Monday or Tuesday to witness an explosion to the upside. Or to the downside. Or to a calm, flat-like level for days!
This is why I bought 20 February 1450 Call Options Friday afternoon, using my entire disposable wad.
You see, it provides a high that is insane, but legal.
If I experience this financial loss rapidly or gradually, I will learn once again what I've learned several times before in my life.
But if, instead, we see the S&P launch off into the stratoshpere next week, due to perceived relative "bargains" or Fed, media or Specialist fund-manipulators, then I will experience a ton of adrenaline, mixed with pride, and saturated with a glee that lasts until my next excess market position.
Freedom is fantastic. Life is wonderful.
Whether I make $10,000 or lose $10,000 in the next two weeks, I will eat the same meals, read the same books and laugh at the same jokes, etc.
If this were not so, I wouldn't be gambling to this degree.
I appreciate your post, and the many good posts responding to my earlier question: "Will I be happy Monday?"
Dinner's a cookin', the Super Bowl is 70 minutes away and I'm not in Utah anymore. What more could a guy ask for?
I was 100% expecting horrific events at rollover. Now, ANY catastrophe seems trivial.
I am truly comfortably numb!!!
Oh insanity, where is thy sting?
-- Joseph Almond (firstname.lastname@example.org), January 30, 2000.
I think that historical technical analysis for predicting market drops (e.g., Elliott Wave Theory, high PEs) don't work any more due to 401Ks and 402bs (nonprofit companies' versions of 401ks). When you have a large amount of money coming in to mutual funds (e.g., Fidelity, Vanguard, other corporate 401k managers) every month automatically from employee paycheck withholdings, the funds buy stocks. You've got all of this money pouring into the stock market every month. How is the market going to go down to significantly "correct" for these outrageous PEs (price/earnings ratios) if there is constant demand for buying? In the past when PEs got too high, individuals pulled their money out of the market. But stock fund managers don't have many options for all of that money coming in, so they keep on buying stocks. Hence the market continues to rise.
Is it sane/prudent for an individual to buy a stock with a PE over 100? Or to buy a company that has never made a profit but the stock is selling over $100? That's what we have today with the Internet stocks (e.g., yahoo, amazon). So what is holding up the prices of these stocks?
True there are some mini-corrections of 500-1000 points, but on a percentage basis of the value of the DOW, it's not that big. I don't think we'll see a 1929 type crash, or the types of crashes being predicted by Elliott Wave theorists for the past 10+ years unless employees move their 401K money into bonds, treasuries, or cash.
-- slza (email@example.com), January 30, 2000.
What does the solar eclipse have to do with the stock market? I used to study astrology years ago. There is a branch of astrology that studies the stock market based on transiting planets. I never studied that, but I suspect that to astrologers an eclipse that causes an "aspect" to the NY Stock Exhange has significance. Any astrologers out there know the answer to this one?
-- one-time astrology buff (firstname.lastname@example.org), January 30, 2000.
Stock market and solar eclipse??...LOL.. Hm, that's a new one me. I guess I will have to watch this one carefully ....LOL>>>>>LOL
-- (email@example.com), January 30, 2000.
Well, it's Monday in Asia and the Markets that are open are all down, but they are most likely just following our Friday lead.
-- Susie (Susie0884@aol.com), January 30, 2000.
Sorry, the link failed, but the URL is: http://quote.yahoo.com/m2?u
-- Susie (Susie0884@aol.com), January 30, 2000.
Buying February Call Options that expire in 3 weeks is TOTALLY STUPID!!! Especially since you could have bought Options with many months of time left. Three weeks! I can't believe such stupidity!!!
-- freddie (firstname.lastname@example.org), January 30, 2000.
That 401k money used to be pension funds. If all the money going in every month then the market couldn't have gone down in the past. Sorry but can't buy that everything is different this time. As an example the 401k at my employer also has bonds and a gaurenteed return.
As a technical stock guy the analysis for tops including in stocks needs a 3-5 % breakout for comfirmation. NASDAQ rolled higher but the S&P and the DOW didn't have a breakout in my book. And now the coast down with lots of excitement for all. That record setting margin is a loaded gun pointed at the head of the bull. A normal correction like LTCM becomes serious problems for both big and small players who are on the wrong side. They were laughing all the way to the bank on the way up but the market moves in two directions, its now time to see the face of down.
-- Squid (ItsDark@down.here), January 30, 2000.
All you people with all the market money try to remeber this one...
Millions DO NOT use Astrology or look to the heavenly bodies for guidance...Billionaires DO.
-- tired of getting sprayed (email@example.com), January 30, 2000.
Anyone got the link to the Comeau site? Interested in what they had to say after the pivot point arrived.
-- Ceemeister (firstname.lastname@example.org), January 31, 2000.
Ilander - If I'm not mistaken, Comeau gave a *range* of 11550-11600 for stocks...and I don't think they ever broke the 11600 level, so his prediction is most certainly in play. According to him, if the market didn't break the 11600 level there would be a drastic drop in price during the ensuing two months. FWIW
-- LunaC (LunaC@moon.com), January 31, 2000.
Thankyou Luna, that is why it would be interesting to have access to Comeau's exact predictions to see exactly what HE meant.
-- ilander -- (email@example.com), January 31, 2000.
"That 401k money used to be pension funds. If all the money going in every month then the market couldn't have gone down in the past. Sorry but can't buy that everything is different this time. As an example the 401k at my employer also has bonds and a gaurenteed return. "
Don't know if it's enough to prop up the market or not, but things are definitely different now.
Pension monies are funded on a quarterly basis, and the requirement is based on actuarial assumptions about present values of future obligations. For instance, if the actuarial assumption is that Squid's retirement will be $750 per month 20 years from now, at a 6% discount rate, what do I need to contribute today to meet the obligation?
This calculation is done (more or less) on a corporate wide level. Now in an environment like the current one, returns have far outpaced the assumed return rates, so in all liklihood, pension plans are over funded. That means a company doesn't have to contribute anything at all.
Now, with 401(k) dollars, money gets put in EVERY paycheck, providing a constant stream of incoming dollars that used to get spent in the economy, or go into savings plans. THat's one reason our savings rate is so low now. 401(k) dollars don't count as "savings".
This provides a stream of billions of dollars into mutual funds.
15 years ago, 401(k) participants allocated, on average, 70% of thier monies into fixed income vehicles such as guaranteed investment contracts (GIC's). These GIC's invested heavily in real estate, helping the 80's real estate boom. When real estate went south, these GIC's defaulted (Executive life, Mutual Benefit).
As education programs increased people's awareness, more monies began flowing into stock mutual funds. Today, more than 50% of employees 401(k) money is in stock mutuals. Another LARGE portion is in employer stock.
Today, most participants are able to reallocate money on a daily basis. This was not the case during the crash of '87. "Daily valuation" was not available, and more often than not, asset transfers were only allowed once per quarter. So participants witnessing the 10/17/87 crash had to wait until 12/31 to transfer $'s.
By that time, calmer heads prevailed, the market started coming back, and many did not move money.
What will happen with individually directed 401(k) dollars during the next crash? This is a HUGE question.
If people see the market slip 10% in a day, will they immediately call to move 401(k) dollars to bonds or money market?
Or will they take a long term view, and keep it where it is?
It is a different world than in 87. To know the psychological dynamics of what that means, however, is not so easy to determine.
-- Duke1983 (Duke1983@aol.com), January 31, 2000.
Most mutual funds have a range of percentage allowed for cash. Noone has answered the question that if 401k money keeps the market up why is it dropping???? There are a bunch of people in my nondot.com company waiting for the stock price to hit a level to retire. They are now starting to bail regardless of the price. That money is coming out of the market. This is not a group that managed their money for retirement the company did it for them.
In 1929 everyone was in the market (generally) because it was an automatic way to make money. 401k's are ensuring everyone is in the market again. But margin debt is not 401k money, the stories of individuals dropping out of work taking a second morgage to become day traders (80+ lose their initial principal and more) have finite credit to cover market losses before they have to slice off economic body parts to pay margin calls.
Sure its different we are now a net debtor nation, with 401k paper gains to rationalize our colective opullent lifestyles. Those paper profits go so do those leased SUV's and housing prices.
The more things change the more they stay the same.
-- Squid (ItsDark@down.here), January 31, 2000.