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Sunday, November 23, 2003
Good evening friends,
For all the new subscribers out there I would like to explain our style of trading for some that may not fully understand why we go to cash when we do. I am a trader, not an investor; there is a very big difference between the two. Traders are not always in the market; we get in and out as the market fluctuates. My opinions of market direction are based on the short-term fluctuations of the market. For the long term, there is no question in my mind that this market is going up. That is why I continue to keep reiterating we have begun a new bull market.
I have also said repeatedly that I believe the NASDAQ will come close to 2000. I recently predicted the NASDAQ would hit 1998 and then turn back because I didn't believe it could break through on the first attempt. We were within 4 points of my target at 1994 before we turned back the first time. I believe we will test that level again in December and then turn back again in January.
I tell you this now so you will have an idea ahead of time what my plans are. I plan to be all cash the first week in January because I expect a lot of selling. People will want to lock in profits on this year's big gains and there could be a sector wide rotation. There is a lot of Dow Theory enthusiasts out there who will be investing in the dogs of the Dow come January. They will wait to sell their winners until January so they can put off paying taxes on those gains this coming April. By waiting to sell, they can defer those taxes until April 2005. This is why, I'm expecting a sell off in January and the NASDAQ 2000 level will not be broken through until the 3rd attempt sometime in 2004. It's too far away for me to make a prediction on when exactly that will happen.
This is what a trader does; we don't stay in the market forever like investors do. Don't get me wrong, investors can do very well just buying and holding in a Bull market providing they have the right stocks. Not all stocks go up so it is crucial to be in the right ones. This service is geared more toward the active trader so that will be our focus. I have said many times, that you must remain flexible and be ready to turn on a dime because that is what the market does and we can only take advantage of these turns if we remain flexible at all times.
I said last Sunday evening that the coming week didn't look good and that you should have already been in cash with me when I was selling the week prior to avoid this down turn. I also said last week that I thought we would start the holiday rally the week of Thanksgiving. Tomorrow starts the Thanksgiving week and I'm of the opinion that we could see a nice rally in the month of December and make a 2nd attempt at NASDAQ 2000. I also mentioned that the chart of the NASDAQ is still in a long term up trend and as long as it stays in that up trend, we need to buy pullbacks in the strongest stocks when we have these bull market corrections. We just had a correction and I'm hoping it's over. The NASDAQ is below its 50 DMA and that is still a negative but because of the oversold oscillators, I believe it could bounce back above the 50 DMA. A close above this level will be very positive and will cause some major buying to begin again. This is one of the reasons I did not take any short positions last week. This close below the 50 DMA could very well be a good shakeout before the end of year rally. We must be ready with our pile of cash to move back in selective stocks for this reason.
Because of the close below the 50 DMA, we are still vulnerable to further selling but at this point, with the market oversold, I believe the chances are better for an upturn rather then further downside. These are very short-term directional changes and we have to be ready to act on each change thus the reason for going to cash before the NASDAQ turned down last week. I wanted to have cash for this pullback so we could rebalance our portfolios in only the strongest stocks going forward. I plan on getting back in some long positions tomorrow morning in anticipation of a year-end rally. Please look at Bulletin comments very closely tonight so you'll know ahead of time what I'm buying, they are already identified on the Bulletin. I will buy these stocks and then immediately place stops to protect my capital in case I'm wrong on the timing of the bounce and we proceed downward. The strongest stocks on the Bulletin are AKAM, NOOF, ASTT, EVCI, HSKA, CKSW and SCON. These stocks will give you the biggest return over time if you are willing to hold them IMO. They should also power ahead and out perform the market if the market should rally into the end of the year like I still think it will. They will also hold up well in a market downturn. So for me, they are minimal risk with a possible big reward.
The strategy we want to take tomorrow is as follows, if the market opens down, we'll buy the dip because I am expecting some buying to start later in the day. If the market gaps up, don't chase, we'll wait 30 minutes and see if we can get a little pull back and then buy. At this point on the charts, it's hard to determine which way will go. The charts say down but my gut says up so what are we to do? The answer is simple, let the market tell you. I will be waiting for the markets answer tomorrow and I will react accordingly. Have a great night everyone, I'll see you Monday evening.
Flash back Sep 9th Bulletin
New Today BFUN .70 9/09/03 Comments = Looks like it's ready to launch buy now (This stock proceeded up to a high of 3.72 two weeks later, a 400%+ gain)
Reminder: The market will be open a half day on Friday November 28. I will not be publishing a Bulletin on Thanksgiving evening. However I will send out a brief commentary. If I find any hot stocks that may be ready to move, I'll list them in the commentary. I will be out of town and will not available for trading on Friday November 28 so there will be no alerts sent that day.
Note: Friends, there are many people out there who won't even have a meal this
Thanksgiving. Please, find it in your hearts to donate some canned goods, potatoes, rolls or
even a turkey to your local food bank. Let's help the less fortunate to be a little happier this
Holiday Season. Your donations will be greatly appreciated by those who receive them. Thank-you.
Earnings Calendar.
http://biz.yahoo.com/research/earncal/20031023.htm...
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