optionman's Account Talk

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Great record, can you supply some kind of documentation that this info was actually written prior to the drop in the market in December. That's the way we work around here, no offense meant.
Norman

Fund Signals:

C: Sell, signal date 17 Dec 07

S: Sell, signal date 17 Dec 07
I: Sell, signal date 17 Dec 07
F: Buy, signal date 27 Dec 07

Signal Notes: All stock funds remain on a sell signals, but the S and C fund signals are getting more bullish.
The bond fund remains on a buy signal, but the signal is weakening.

Trade history 2008:

100% F fund 27 Dec 07 – 15 Jan 08 {+1.85%} (while many folks were in stock funds getting hammered)
100% G fund 15 Jan 08 - 17 Jan 08 {0%} (sold bonds into strength anticipating a market capitulation and reversal)
100% S fund 17 Jan 08—{??} (Capitulation bottom reversal?) Auto-tracker began tracking position on 17 Jan 08
 
nnuut---Thanks!, and no offense taken. Unfortunately I only recently began posting my signals, but looking back at my previous posts I began posting my TSP positions which were based on the signals on 9 Jan. I understand you may be skeptical, that's OK even expected. I believe my signals will speak for themselves as time goes. I'll continue to post them here for all to view and will post anytime I make any IFT prior to or near the market open.

optionman:cool:
 
Yeah, the tracker will verify your moves. Best of luck, I like it when Members take the initiative to create a system and use it.
 
IFT to 100% G Fund

I’m making an IFT to 100% G fund today. For those who have been reading this thread you know I’ve been pounding the table about this being a capitulation and trying to catch a bottom, ironically my signals are looking stronger suggesting a buy signal could be near, but it hasn’t happened yet and I’m not sold on the idea of holding through the FEDs interest rate decision next week. I suspect there will be a lot of speculation on the decision from now through next Tuesday afternoon.

There is just too much nervousness and uncertainty out there right now evidenced by the volatility in both futures and stock markets lately. I mentioned yesterday that “I don’t like the idea of selling into a panic and will normally wait for a better exit which in most cases presents itself shortly after a sell off like this”. Well we had a nice turn around late in the day with some encouraging signs and I could be bailing out right at the time I should be holding, but my signals remain on a sell for stock funds and I want to see the market break through and hold above a few more resistance levels so I’m stepping aside and letting the dust settle.

I don’t plan to get back in until after the FOMC and then only if my signals move from a sell to a buy or we get another opportunity that I can’t pass up in anticipation of a signal change.

Now hopefully we can get some follow through to yesterday’s up move and I’ll be getting out on strength rather than weakness.

Regardless of my personal opinion on market direction, I rely on my propriety trading system signals for TSP fund positions and allocations. In some situations when a signal reversal is anticipated positions are taken counter to the signal.

Fund Signals:

C: Sell, signal date 17 Dec 07
S: Sell, signal date 17 Dec 07
I: Sell, signal date 17 Dec 07
F: Buy, signal date 27 Dec 07

Signal Notes: All stock funds remain on a sell signals, but the S and C fund signals are getting more bullish. The S fund appears to be the strongest followed by the C fund, the F fund looks weak here and the I fund will probably move up in lockstep with the other stock funds but may not keep up with the S or C fund at this point.

Trade history 2008:

100% F fund 27 Dec 07 – 15 Jan 08 {+1.85%} (while many folks were in stock funds getting hammered)
100% G fund 15 Jan 08 - 17 Jan 08 {0%} (sold bonds into strength anticipating a market capitulation and reversal)
100% S fund 17 Jan 08—{??} (Capitulation bottom reversal?) Auto-tracker began tracking position on 17 Jan 08
100% G fund 24 Jan 08—Waiting for signals

Follow the money or follow the herd!

optionman:cool:
 
Up or Down? Bull or Bear?

I’m on the sidelines in the G fund as of the close yesterday. My signals for stock funds remain on a sell. I’ve been mentioning lately that the bond fund looks weak, it continues to deteriorate and will probably move to a sell as soon as tomorrow or Monday.

The market sure had a wild ride this week and while I was expecting my signals to move to a buy they remained on a sell. They are growing stronger, but it’s taking longer than anticipated for them to move to a buy so I stepped aside and will wait a little longer. The market has taken a tremendous whack and although it seems to be stabilizing, there are too many uncertainties, maybe it’s just saying “thank you sir may I have another”.

There are both bullish and bearish implications, but with the uncertainty the bearish implications appear to be growing stronger. I still hold out some hope for a possible bottom soon, but it is fading.

I’m somewhat apprehensive about being in the stock funds during the FOMC meeting on Tuesday. It could be one of those “good news is bad news and bad news is worse situations” what the hell is that suppose to mean optionman?

It means if the market has already priced in a .50 basis point rate cut any rally attempt after the announcement may be short lived and if the Fed says hey I just gave you a .75 cut so I’m going to wait and let the system absorb it before cutting any more, then the market could sell off hard. On the other hand we could launch from here, but with my signals on a sell in front of the meeting I’m comfortable missing a few days of a rally if one begins at that point, rather than find myself on the losing end of a position if we tank.

I’m actually becoming more bearish than bullish and am looking for a possible shorting opportunity in my trading account if we get to resistance areas and begin stalling. The resistance areas on the averages I’m watching are:

SPX first 1375-1380 then 1400-1410 DOW 12,600 NAZ 2450

If we are entering a bear market which very well could be happening you will begin seeing hard fast sell offs at resistance levels and moving averages. The sell offs will take the market down farther and faster than we are used to so it would be wise to be cautious at those levels.

I’ll post a short interest rate study/review on this thread this weekend titled Implosion or Explosion. Look for it Sunday.

Regardless of my personal opinion on market direction, I rely on my propriety trading system signals for TSP fund positions and allocations. In some situations when a signal reversal is anticipated positions are taken counter to the signal.

Fund Signals:

C: Sell, signal date 17 Dec 07
S: Sell, signal date 17 Dec 07
I: Sell, signal date 17 Dec 07
F: Buy, signal date 27 Dec 07

Signal Notes: All stock funds remain on a sell signals. The S fund appears to be the strongest followed by the C fund. The F fund looks ready to move to a sell very soon, possibly today or Monday. The I fund will probably move up in lockstep with the other stock funds but may not keep up with the S or C fund at this point.

Trade history 2008:

100% F fund 27 Dec 07 - 15 Jan 08 {+1.85%} (while many folks were in stock funds getting hammered)
100% G fund 15 Jan 08 - 17 Jan 08 {0%} (sold bonds into strength anticipating a market capitulation and reversal)
100% S fund 17 Jan 08—24 Jan 08 {+2.33%} (Capitulation bottom reversal?) Auto-tracker began tracking position on 17 Jan 08, check autotracker this weekend.
100% G fund 24 Jan 08— Stepping aside in front of FOMC and waiting for signals

Follow the money or follow the herd!

Optionman:cool:
 
Agree with you Option. I judge this latest rally as a "Bear Rally" in an overall bear market, denoted by the 50 day EMA crossing below the 200 day EMA (and both on a downtrend). Although it would be nice to get in and out for a quick gain in these short rallies, I remain in capital protection mode for the time being. The overall weakness in the economy and possible further weakening has not magically gone away.
 
Agree with you Option. I judge this latest rally as a "Bear Rally" in an overall bear market, denoted by the 50 day EMA crossing below the 200 day EMA (and both on a downtrend). Although it would be nice to get in and out for a quick gain in these short rallies, I remain in capital protection mode for the time being. The overall weakness in the economy and possible further weakening has not magically gone away.


Summor '06 also had the 50 below the 200 MA for about a 2 month period. Looking back, how did we know we were not entering a bear market at that time?
 
Summor '06 also had the 50 below the 200 MA for about a 2 month period. Looking back, how did we know we were not entering a bear market at that time?

Use the EMA, not the MA. Looking back at the SPX plots, the 50 day EMA just touched to 200 day EMA in 2006, but did not really go below it. Also, the 200 day EMA was moving sideways and was not clearly in a downtrend, as is the case now. Remember, the criteria is that the 50 day EMA crosses the 200 EMA and both are in a downtrend. This is called a "death cross", the last one occurring in the fall of 2000, just as the recession was beginning. Conversely, if the 50 day EMA crosses the 200 day EMA and both are are in an uptrend, this is called a "golden cross" and is a good indicator of an emerging bull market (last one occurred in spring of '03).

Although certainly no indicator is foolproof, the current odds of a recession have greatly increased.
 
Bear trap or reversal?

The market turmoil of late has left a lot of market gurus calling it a bear market and I am slowly moving to the bear camp with them. I still hold a glimmer of hope for a market bottom and reversal. Being 100% in the G fund I’m positioned to take advantage of whichever direction the market chooses to take. If we bounce out from here great, but if not, I can stay on the sidelines for as long as it takes and get back in when my signals tell me to.

We should get a better idea of market direction after the FOMC meeting Tuesday. I expect a market rally or sell off immediately following the announcement. If it’s a rally it could be short lived, run into resistance and sell off sharply or perhaps it could be the reversal point we’ve been looking for. I want to see either a break through and hold above a few resistance levels or a test of recent lows and see how the market reacts before becoming to bullish. I expect we will see one or the other next week.

Regardless of my personal opinion on market direction, I rely on my propriety trading system signals for TSP fund positions and allocations. In some situations when a signal reversal is anticipated positions are taken counter to the signal.

Fund Signals:

C: Sell, signal date 17 Dec 07
S: Sell, signal date 17 Dec 07
I: Sell, signal date 17 Dec 07
F: Buy, signal date 27 Dec 07

Signal Notes: All stock funds remain on a sell signals. The S fund appears to be the strongest followed by the C fund. The F fund looks ready to move to a sell very soon. The I fund will probably move up in lockstep with the other stock funds but may not keep up with the S or C fund at this point.

Trade history 2008:

100% F fund 27 Dec 07 - 15 Jan 08 {+1.85%} (while many folks were in stock funds getting hammered)
100% G fund 15 Jan 08 - 17 Jan 08 {0%} (sold bonds into strength anticipating a market capitulation and reversal)
100% S fund 17 Jan 08—24 Jan 08 {+2.33%} (Capitulation bottom reversal?) Auto-tracker began tracking position on 17 Jan 08, check autotracker this weekend.
100% G fund 24 Jan 08— Stepping aside in front of FOMC and waiting for signals

Follow the money or follow the herd!

Optionman:cool:
 
Re: Bear trap or reversal?

The market turmoil of late has left a lot of market gurus calling it a bear market and I am slowly moving to the bear camp with them. I still hold a glimmer of hope for a market bottom and reversal. Being 100% in the G fund I’m positioned to take advantage of whichever direction the market chooses to take. If we bounce out from here great, but if not, I can stay on the sidelines for as long as it takes and get back in when my signals tell me to.

We should get a better idea of market direction after the FOMC meeting Tuesday. I expect a market rally or sell off immediately following the announcement. If it’s a rally it could be short lived, run into resistance and sell off sharply or perhaps it could be the reversal point we’ve been looking for. I want to see either a break through and hold above a few resistance levels or a test of recent lows and see how the market reacts before becoming to bullish. I expect we will see one or the other next week.

Regardless of my personal opinion on market direction, I rely on my propriety trading system signals for TSP fund positions and allocations. In some situations when a signal reversal is anticipated positions are taken counter to the signal.

Fund Signals:

C: Sell, signal date 17 Dec 07
S: Sell, signal date 17 Dec 07
I: Sell, signal date 17 Dec 07
F: Buy, signal date 27 Dec 07

Signal Notes: All stock funds remain on a sell signals. The S fund appears to be the strongest followed by the C fund. The F fund looks ready to move to a sell very soon. The I fund will probably move up in lockstep with the other stock funds but may not keep up with the S or C fund at this point.

Trade history 2008:

100% F fund 27 Dec 07 - 15 Jan 08 {+1.85%} (while many folks were in stock funds getting hammered)
100% G fund 15 Jan 08 - 17 Jan 08 {0%} (sold bonds into strength anticipating a market capitulation and reversal)
100% S fund 17 Jan 08—24 Jan 08 {+2.33%} (Capitulation bottom reversal?) Auto-tracker began tracking position on 17 Jan 08, check autotracker this weekend.
100% G fund 24 Jan 08— Stepping aside in front of FOMC and waiting for signals

Follow the money or follow the herd!

Optionman:cool:
you may opt to go premium with your moves option.....how long will you continue to give this FREE advice away and not be compensated?
 
Mr Recognizer---Thanks for your comments and that’s a good question. I believe I should prove my propriety signal system before considering the idea of pursuing opting for a premium service and being compensated. And since I would want to see a history of a system before I consider following it, I will continue to post my TSP signals on this thread free of charge for 1 year from the date auto-tracker started tracking my account (17 Jan 08).

I’ll post all IFTs the day I make them so everyone monitoring this thread can keep up with them as I make them and will know my reasoning. This will give those who may be following a better opportunity to follow along and see if my signals work and how well my system performs and get a better feel for my market analysis and comments.

If I were watching a system on this site I would be looking for consistency in the autotracker. I would want to see a system that can consistently place in the top 10 with good results. Since my results just started being tracked on 17 Jan 08, it will be interesting to see my position when the results are posted this weekend.

optionman:cool:
 
Where is the market headed?

Friday opened strong but closed weak creating a bearish engulfing candle pattern. These patterns carry more weight when the market is overbought than when it’s oversold, but in this environment caution is warranted. It looks like traders just didn’t want to carry their trades over the weekend. Can’t blame them after what happened last week, I wouldn’t carry trades over the weekend either, not after that. A few positives to note is that the SPX actually closed up for the week and believe it or not on up volume. If it can hold above 1325 it may be able to make a run from here, if not, we’re likely to see a retest of the recent lows.

Think an interest rate cut may propel the market out of this? I’ll post an interest rate study here tomorrow.

Regardless of my personal opinion on market direction, I rely on my propriety trading system signals for TSP fund positions and allocations. In some situations when a signal reversal is anticipated positions are taken counter to the signal.

Fund Signals:

C: Sell, signal date 17 Dec 07
S: Sell, signal date 17 Dec 07
I: Sell, signal date 17 Dec 07
F: Buy, signal date 27 Dec 07

Signal Notes: All stock funds remain on a sell signals. The S fund appears to be the strongest followed by the C fund. The F fund looks ready to move to a sell very soon. The I fund will probably move up in lockstep with the other stock funds but may not keep up with the S or C fund at this point.

Trade history 2008:

100% F fund 27 Dec 07 - 15 Jan 08 {+1.85%} (while many folks were in stock funds getting hammered)
100% G fund 15 Jan 08 - 17 Jan 08 {0%} (sold bonds into strength anticipating a market capitulation and reversal)
100% S fund 17 Jan 08—24 Jan 08 {+2.33%} (Capitulation bottom reversal?) Auto-tracker began tracking position on 17 Jan 08, check autotracker this weekend.
100% G fund 24 Jan 08— Stepping aside in front of FOMC and waiting for signals

Follow the money or follow the herd!

Optionman:cool:
 
Implosion or Explosion?

When the FED cuts interest rates the thought process is that the stock market will rise and conversely when they raise rates the market will fall. There’s an old adage “don’t fight the FED”

Most seem to subscribe to this notion, but allow me to prove to you it’s a misconception. I’ll do so in the form of having you do your own homework and proving it to yourself, so let’s get started.

First visit http://www.the-privateer.com/rates.html and notice the dates the FED began cutting rates in Jan 2001 just after the market peaked in Aug-Sep 2000 timeframe. They continued to cut rates with the final cut in that cycle being June 25th 2003. Print this or jot it down.

Now go to your favorite charting service and pull up a daily chart of the S&P500 (symbol $SPX in stockcharts) from Aug-Sep 2000 through June 2003. The SPX peaked in Aug-Sep 2000 and bottomed in Oct 2002 with a test of the bottom in Mar 2003. For those who don’t have a charting service stockcharts.com is very user friendly and offers some free charts at http://stockcharts.com/index.html

Note that during the entire interest rate cutting cycle the market kept falling rather than rising. Now let’s take a look at a raising cycle.

Go to the same sites and look at the mid 2004 to mid 2006 time frame and you will see that while the FED was raising rates and the markets were rising rather than falling.

Bottom Line: Cutting short term interest rates does not necessarily lead to rising markets and raising them does not necessarily lead to falling markets, if anything, when it does happen it’s merely a coincidence. For further proof, test this out for yourself during other time frames. You may find some instances when it happens, but by and large there is no real correlation. This makes it even more difficult to determine what may happen in the near term even if the FED cuts rates. So far during this rate cutting cycle there have been 4 rate cuts. The market rose after 2 and fell after 2. Take a look again at the sites and you will find this:

August 17th 2007-----50 basis point rate cut-----The market rose following the cut.
September 18th 2007----- 50 basis point rate cut----- The market rose following the cut.
October 31st 2007----- 25 basis point rate cut----- The market fell following the cut.
December 11th 2007----- 25 basis point rate cut----- The market fell following the cut.
January 22nd 2008----- 75 basis point emergency rate cut-----?

Another thing to keep in mind is the FED is not there to save the markets. We seem to think this is true, but their greater responsibility is to keep the economy rolling along, not come to the rescue of the market when trouble looms. Just because they did on the 22nd doesn't mean they will agian. This could create a rude awakening for those who believe they will step in again if the market appears to be in trouble.

So where are we and where are we likely to go from here?

First, a little history on recent activity in our economy. Although this may sound pessimistic I'm actually a little more optimistic at least for now.

We experienced a housing bubble that burst in 2007, a credit crunch followed and even more banking problems ensued. This housing bubble continues and we are still seeing the fall out in the form of new home sale starts and existing home sales plunging and so on. People can not afford to buy homes and those that own them will not likely take out second mortgages in this turmoil. Many are barely hanging on hoping the government may help but the packages the government put together to help only help a select few. We are starting to see higher unemployment rates, (the number of unemployment claims does not paint the right picture because one can only receive unemployment compensation for a limited time, so there are many more not counted in the total that remain unemployed leaving us guessing what the true number may be) Oil is rising (I may write another study on rising oil and its impact on markets in a few weeks) causing most to spend more on their transportation costs, airlines are charging surcharges etc to offset the higher fuel costs. This leaves less spendable income to the average low and mid income families. The picture is gloomy and not a lot of relief is in sight at least in the near term. We have the prez’s stimulas package and the FED cutting interest rates in an attempt to get the economy back under control, but they are late and even when we get the stimulas package approved it will take until this summer to see if it produces the results it’s intended to. So for the time being we have FED making interest rate cuts attempting to stem the blood flow but now many are beginning to believe the FED is panicking. This leads to more uncertainty and anxiety in the markets and if there is one thing the market hates it’s uncertainty. And as I have just proven even if they do cut rates it may not help.

I said in the beginning I am actually more optimistic than pessimistic. Although I’m slowly becoming more bearish I still hold out a glimmer of hope for a rebound from here, but if we test and can’t hold recent lows, I will become even more bearish. Here are my reasons for being optimistic
  • The decennial market cycle suggests years ending in 7 in the cycle are the most bearish and usually bottom out near the end of the year or early in the following year. Years ending in 8 are generally very bullish, second only to years ending in 5 in the decennial cycle.
  • The market almost always overreacts and this can set up for a great entry soon.
  • Our economy is in trouble no doubt, but as I said in one of my previous posts it’s not falling apart and will rebound at some point, we may feel some more pain first and it may take a while especially if were are entering a bear market, but it will eventually rebound, it always has.
  • Although the stimulas package may not have an immediate impact it will likely have an impact over the summer and going into the fall.
  • The market remains oversold and many of the market internals and sentiment indicators have recently met extremes and are screaming buy.
  • My signals are growing stronger and could move to a buy on a strong up move from here. I will be watching closely especially at resistance levels.
  • I’m running low on Alka Seltzer, this normally happens near market bottoms, OK I just made that one up.
So the question implosion or explosion remains and at this point caution is warranted. If we are entering a bear market it will be a difficult year to trade in and you will have to be extremely careful moving into or out of positions because of the potential sharp sell offs at resistance points and moving averages.

Follow the money or follow the herd!

Optionman:cool:
 
Interesting analysis. The market reacts to expectations, not a specific cut. There were also, some big oversold rallies during the 2000-2003 time period. I'm sure the same will happen again.
 
OptionMan,

Thanks for taking the time and effort to post your well structured, detailed and thought-provoking analyses - VERY easy for noobs like me to read and follow... ;)

Happy trades to you...
 
Agree - thanks Optionman. Your sentiment and reasoning concerning the market is very similar to mine, although I am somwehat more bearish at the moment.
 
Interesting analysis Optionman. Just like Jeremy Siegel said, Fed rate cuts have come to be yet another incident factored into the market well before they occur. Up until the 90's, the actual act of cutting interest rates had a positive effect on the market. Recently, traders have positioned themselves for the rate cut well in advance by way of speculative hype. Traders can now even bet on future Fed interest rates with T-Bills.

It's safe to say that we could probably throw the rate cut theory into the same camp as the Dow Dogs theory. Once everyone subscribes to coinciding theories, they gradually lose their effectiveness.
 
Signal Change

My signals moved to a buy today for stock funds and a sell for the bond fund. Since we have the FOMC meeting today and I believe there’s a strong possibility of a sell off either following or within a few days after the announcement I plan to remain 100% in the G fund.

Waiting for an entry point after my signals moves is fairly common. Many times when I get a signal we’re in a strong short term up move and we wait for a pullback to enter. There's also the possibility that these could end up being short term buy signals. Will know more in a few days. Two events this week (the FOMC today and the jobs report Friday AM) have the potential to swing the market significantly in either direction.

We have 3 bearish patterns I’m watching very closely, (1) a classical lower high/lower low bearish pattern, (2) the bearish H&S pattern and (3) the current downtrend. If we sell off from here I’ll be looking for a bottom soon after, if not, I’ll want to see a break and hold above the 1375-1380 area followed by a break and hold above the 1410 area.

Regardless of my personal opinion on market direction, I rely on my propriety trading signals for TSP fund positions and allocations. In some situations when a signal reversal is anticipated positions are taken counter to the signal.

Current positions/allocations:

100% G fund as of 24 Jan 08

Fund Signals:

C: Buy, signal date 29 Dec 07
S: Buy, signal date 29 Dec 07
I: Buy, signal date 29 Dec 07
F: Sell, signal date 29 Dec 07

Signal Notes: All stock funds moved to a buy as of the close yesterday. The S fund appears to be the strongest followed by the C fund. The I fund will probably move up in lockstep with the other stock funds but may not keep up with the S or C fund at this point. The F fund moved to a sell as of the close yesterday.

Trade history 2008:

100% F fund 27 Dec 07 - 15 Jan 08 {+1.85%}
100% G fund 15 Jan 08 - 17 Jan 08 {0%}
See autotracker for results beginning 17 Jan 07

Optionman:cool:
 
Bulls and Bears fighting it out

My signals are on a buy for the stock funds and a sell for the bond fund as of the 29th. I mentioned yesterday I believe there’s a strong possibility of a sell off either following or within a few days after the announcement and I plan to remain 100% in the G fund.

Well the cat’s out of the bag. We got a 50 basis points rate cut. The market shot up immediately after the announcement, but couldn’t hold the gains and gave them all back and then some by the close. In the process it penetrated one of the resistance points 1375-1380 I’m watching, but it couldn’t hold. I get the feeling those who held their positions through the carnage last week took the opportunity to unload yesterday when we reached the resistance level. The path of least resistance still seems to be down so I’ll continue to wait patiently in the G fund. The slight pullback today was not enough.

In my opinion those who are in the G fund are in a win-win situation. We can wait to see if the bottom is tested and resolved to the downside for a better entry or wait to see the market breaks through a few resistance points on the upside, we may miss a few days of profits if it resolves to the upside, but who cares, my signals will grow stronger and I will still get a good entry.

I remain in attack mode like a cat crouched down behind a tree waiting to pounce on the bird that just landed on the other side and can’t see him, once he sees him it’s to late the cat has him.

Current positions/allocations:

100% G fund as of 24 Jan 08

Fund Signals:

C: Buy, signal date 29 Jan 08
S: Buy, signal date 29 Jan 08
I: Buy, signal date 29 Jan 08
F: Sell, signal date 29 Jan 08

Signal Notes: All stock funds are on a buy as of 29 Jan 08. The S fund appears to be the strongest followed by the C fund. The F fund moved to a sell as of the close 29 Jan 08. The I fund will probably move up in lockstep with the other stock funds but may not keep up with the S or C fund at this point.

Trade history 2008:

100% F fund 27 Dec 07 - 15 Jan 08 {+1.85%}
100% G fund 15 Jan 08 - 17 Jan 08 {0%}
See autotracker for results beginning 17 Jan 07

Optionman:cool:
 
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