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19-Jul-2006
Counting Questions, from Victor Niederhoffer

There is much backing and filling in the international area, and many countries' interests are involved, and many checks and balances seem to be in place vis-à-vis the interests of all these other countries, particularly the desire to maintain a balance with Syria and the desire to keep Iran in check. Sort of like a simultaneous team chess game with attacks and defenses on all sides and consultation allowed with new grandmasters from many different countries ready to enter and take the place if the score gets inappropriate, or a team tag match in professional wrestling, or perhaps Johnny on the Pony, the street game I played as a kid where everybody piles on but not too hard lest the pony get knocked over or we fall off.

At times likes these, the question emerges: Does counting really help. After all, we can point to 100 specific news announcements during the day about this or that increase in tension that sends the market roller-coasting down or up. And yet, most of us who count find that the times when counting works the best is when tension is the greatest and no rudder seems appropriate. With this in mind, I propose the following 15 counting questions:

1. What happens after three down days in a row?
2. What happens after stocks are at a 20-day minimum on a Friday?
3. What happens after bonds close at a 20-day max?
4. What happens after a down week of more than 2%?
5. After two down weeks?
6. What is the likely impact of Humphrey Hawkins testimony when the market has been down more than 30 points in the week leading up to the meeting?
7. How do stocks perform in the week of options expirations?
8. What is the performance of stocks in the middle of earnings announcement season?
9. Is the influence of crude positive or negative in such situations as this?
10. Gold is at an eight-week high. Bullish or bearish?
11. Bunds are up more than 100 in last two days with stocks down both days. Anything predictive?
12. Nasdaq is at a 21-month low last missed by September 2004. Anything predictive?
13. G 7 Meeting. Good or bad for stocks when down in preceding?
14. Many companies are beating forecasts but going down on earnings releases. Good or bad?
15. VIX rose 50% in the last week. Bullish or bearish?

If the answers to these questions get too easy, perhaps combining two or three at a time will prove more illuminating -- or perhaps the changing cycles within each of the relations should be considered.

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