Dorsey Wright & Associates. Point and Figure Message Board

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Non-Tech : Dorsey Wright & Associates. Point and Figure

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To: Ms. X who wrote ()	5/18/2000 1:30:00 PM
From: Tommy Dorsey	Read Replies (6) of 9427

Ok, lets discuss the market for a second. Tomorrow is option expiration. Those who have CSCO the stock does not look good at all and I know that is heresy but the stock has a series of lower tops and bottoms and RS is about to reverse to O's Tuesday. The stock looks like it will be rivited to $55 for expiration. In the NASDAQ in general the trend is to stocks trading below the trendlines. This is not good and does not bode well for any sustained rally, however being as wild as the index is and has been large moves are not only possible but probable. Sustained moves are another story. The risk is still very high in these stocks. I have many calls each day talking to brokers who have clients who want to get back even and are willing to re-enter the bull riding contest to see if they can hold on for 8 seconds. This thought process has the potential to be disasterous. The play continues to be in the NYSE hands down. This means that the average client who diversifies his portfolio or is an indexer will get the average return of about 12% which has been the average for about the last 80 years. Keep in mind that is 12% on average going forward. For some accounts that took big drawdowns the last two months, this means a long time to get even. Investors are not use to waiting for things to happen. This will be a problem for those who feel the need to double up to catch up. The real play at this juncture is portfolio preservation. Hedging does two things, it provides cash flow while things are "middlin" and provides limited downside protection if things again get out of hand. A summer rally would be normal but, again, don't expect it have any legs with the NASDAQ until we see the Percent of stocks above trend reverse up and the percent of stock on RS X's reverse up. I expect at some pont going forward that the OTC and NYSE will once again move in tandem but that is not the case now. Keep the volatility of the stocks you buy firmly in mind. Especially the pro's. These OTC issues have become options and are not suitable for most accounts. I also surmise it will be difficult for the short seller to make money in the OTC issues as well. My guess is on a weekly basis the NDX could move to 4200 which will be about center of the bell curve. It is perfectly normal now on a short term basis. This places a 50-50 probability of an up move or down move. The longer term picture places a higher probability of an upmove in the NDX than a down move simply because it resides below the center line. This is basic statistics and no crystal ball used. It is also never good to place any large bets going against the direction the fed is moving and believe it or not inflation is back. The groups that are outperforming are the commodity related issues. Lets re-group here and take it one step at a time. Dodge City is over in the market and the Sheriff is back from vacation. One last thing. IF you have a stock that is below the trend line, take it seriously that the risk is higher than if it is above the trend line. We look for short sales in stocks that are below trend, not long positions. T

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