The Inger Letter Forecast

March 18, 1999

Not much "green" seen. . . on this Saint Patrick's Day, as repeated declines were aborted by the press of equally frequent rally efforts. Fundamentals and technicals are little changed from views expressed in these Daily Briefings over the past couple nights. Though the market sold-off at day's end, much as suspected, the S&P premium was not yanked, which means you could have a risk of a negative opening if the market responds to post-close warnings that we'll touch on. Also; the ability to calmly trade S&P's (or the like) in a sequence of fast-market conditions such as we're in now, does not exist. So far, short-term attitudes of scalping quick moves without trying to overwhelm one's thinking with bigger picture considerations, seems best. After a mixed result today, we're in a precautionary overnight short from the June S&P 1310-12 vicinity.

(This overnight S&P short in fact was covered in brief opening weakness via our 900.933.GENE hotline, and we went long. The long was sold at a very nice gain later in the morning, and a new speculative short initiated. That one was again reversed back long before lunch Thursday, with an expectation of 10,000 DJ ahead of, or involved with, Friday's Triple Witching Expiration. We anticipate more aggressive swinging until the dust settles in the manner that might again warrant taking something closer to a stock market position stance. Our views about the macro-situation and macro-risk, aren't changed; but anyone trading stubbornly, or biased bullishly or bearishly, during a Triple Witching Expiration, is asking for trouble. It's hard enough even for those who are opinion neutral on a daily basis, when in a short-term oscillating market that remains irresolute.)

Bagpipers or bagholders?

Given the character of this action; it might be the Street's "Pipers" that get bagged in days ahead though again, that's not yet confirmed by this oscillating action. We're trying to avoid being hurt in any way even if that means not embracing a flat-out bearish (or bullish) perspective. At the same time it strikes us those seeing Green here, are those who've used rallies for selling, not buying.

It has been that way all year really. So, for those investors who are engaged in fund-switching or other types of activities, which require a big broad trending move; I must say they don't have one yet. But; that's not what we basically focus on; as trading the S&P has been extremely rewarding this year, with one or two exceptions, but nary a week that wasn't caught. We're sorry that many expressing frustration that the market hasn't resolved the "big picture" aren't thrilled. However we warned of that before the year began. That warning was: that 1999 wouldn't be like 1998; that no shock value existed for the crisis atmosphere of last year, and as we expected the market to run into a brick wall of resistance early this year (it did) and drop; but to do so in a series of moves.

The market has had more such indecision moves and it lasted longer than originally thought; but we had closest-to-accurate interpretations of how the year's 1st quarter would go than anyone we know of. That may be faint praise for the bulls demanding a huge soaring rally, or bears wanting the world to end; but it has been an essentially correct advance call. As noted, we caught most of the moves. One of a series of comments (even last month) was that if you were (and we were) positioned for a break, and it didn't occur (it started too, some of today's bullish technicians got excited about downside, which failed to follow-through), then the market would move above the previously stated vital 40-day moving average. If that occurred, a key part of recent thinking (whether one was enthused about it or not) was that a move back to the high end of the trading range would not fail at the old high but would take it out. That was an idea that you wouldn't get a triple top; take 'em down, and then have a quadruple top without breaking 'em out to the upside.

That occurred; and you knew that we thought anyone who had shorts or Puts (etc.) structured for a decline had to get out of the way (in many cases at profits, not losses) until the Expiration. Last night we issued our modified alert; limited because of the respect for the Expiration; not because we like the market's action. We don't. But it is nerve-wracking because of the Triple Witch, and of course all this is occurring at the same time the Street is pressing for a huge upside breakout as you know from the Dow 10,000 level. We're not in the camp that says you won't see a DJ closing there for years, though we suspect the only crowd really worried about that might be the financial media which has incurred production costs in congratulatory shows to celebrate the event. We're sure that in the fullness of time, lots of higher numbers will be seen, and maybe this one in these coming days (if they are reasonably lucky). If they're not then everyone is focused on the upside, including many of the bears at least temporarily. That's one reason we're now short overnight. In a nutshell, we're willing to try to catch upside waves in this overbought daily, weekly and monthly market condition, while at the same time increasingly willing to do shorts again, particularly as it nears coming conditions for a more feisty decline, in which we won't join high-priced bagholders, who are potentially those buying into strength of a long-anticipated celebratory breakout event.

Who are the bagholders? Those that have bought stocks so recently in the wake of this week's "confirmation of strength" calls by some technicians and analysts. Having recognized the rally as a fact-of-life about two weeks ago; we caught most (but not all) of the upside. So, very intact for all this, we're more interested in not missing the next downward wave, on a presumption it's not going to be lagging for long. If we're wrong, are we then the bagholders? Not if we recognize it, and get out of the way, just as we did two weeks ago. We're more interested in catching waves, as opposed to constantly championing the upside, or always claiming a wave is cresting. We see the market this year as a series of irresolute waves, many of which crest too soon to afford a wild ride to shore. But one of these promises to turn into a Tsunami, which will drown all those bulls in the Street who are overstaying common sense investments, especially those that are leveraged.

And, in light of our thoughts about fast markets, one reading just this DB shouldn't presume that we won't reverse again for a long-side trade with a short-term perspective Thursday morning. At the same time the much bigger picture view persists here, as far as increasing risk and a number of factors (including our multi-month bullishness last Fall, into early this year), which differentiate our thinking from many also now worried, but who never felt an upside move was coming back in the Fall of last year. Just because they agree with us now (or vice versa), doesn't mean a decline can't or won't happen soon. That's one reason why, particularly as some mechanics (no offense intended to anyone in particular, we note) just in the prior couple days turned more bullish, we in fact felt it necessary to issue a modified alert last night; thus holding a precautionary short now. In fact it's not something we like to do in an Expiration week, and many might not want to play it. But, we think it's a risky time right now, which probably would see the market lower-yet, if not for the Expiration. So, if we get an S&P re-balancing lift in the morning, we're not sure that will hold.

Bottom line: the description of the "alert" was precautionary, because of after-the-fact of the last couple of week's rallying turning people bullish, and because market internals were deteriorating, which in our view should not have stimulated any technical confidence; just the opposite in fact. So, we're respecting Triple Witching, denoting sectors that aren't moving (need to for any bullish resolution), and holding another short overnight, which we'll possibly exit early in the morning. (It might again be noted we did; with a small gain. Then we went long; got a good gain and looking for a new spot to sell the long and to short as this courtesy version is posted to Internet visitors.)

In the interim, as we're thrilled by Netscape's (NSCP) rise to 98 ahead of merging with America Online (AOL), as we've sold only part of NSCP, and kept the balance since 16, we're cautioning that any upside as a result of the re-balancing of the S&P resulting from capitalization changes in fact should be taken with a grain of salt in the morning, with respect to the general market action.

In summary. . the McClellan Oscillator was at +46, down from +59. Increasingly this looks like the pattern that typically occurs after exhaustion more so than before a move higher of the stock market. So far it looks like at least a temporary exhaustion, curiously in an important Expiration week, also at a critically important psychological level for the Dow; though it's not yet resolved. (Of course we won't deny for a moment an upward tilted Expiration, and will trade accordingly.)

The preliminary pattern call for Wednesday was down-up-down-up, and while choppy, the stock market came close to just that. Thursday could be down-up-down-up-failure; but only if we take out noted supports before the rally efforts are mounted. (If not it could be a fairly conventional up Expiration type situation, which is what we intend playing for if nothing dramatic happens early.) (So for now; the proximity of the Dow 10,000 Marquee is easily there, in harmony with conditions closer to what's seen near the end of something, not the beginning. That doesn't mean all of this turns on a dime however; as we've outlined in recent DB's.)

The volume of all the gold ever mined can occupy a cube 63 feet on each side.

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