. . . Welcome to the Final Quarter of 2000. . . the Subjective View]
Bob, I like Maverick's theory about tax loss selling. It is good thinking. If you were a fund manager holding INTC, AMD, LU, T, WCOM even CSCO, not to mention the small caps like MMPT, LQID or CMGI. . . .and you suffered the sort of loss as these and so many other stocks have over the past 9 full months. . . .would you not dump them out and take the tax loss? Would you not "dress up" your windows. . your port . . . with some winners for your losers. . . perhaps swapping your value plays for "Better Value" plays? Or would you GAMBLE on the market raging in the 4th quarter and all your losers becoming winners on the year? That's a long-shot in any race. NOTE: Yet, many of these same stocks pose big opportunities to those just starting positions.
So yes, I tend to agree that some of what we saw the past few weeks has been tax loss selling. But this implies that there is money looking for a new home. And I believe the volume on Monday morning will be markedly different than most any day in the summer. And I think some of that could be related to rotation from tax loss selling . . .For example: if you were holding INTC. . .you dump it for the tax loss, then rotate into AMD for the bounce. .or vice versa. . .and as long as you hold it for 31 days you are entitled to the tax loss, otherwise it is considered a wash sale and you are not.
And if the fund manager really wants to be holding the other stock by years end, they can rotate back. . .so that by years end they can claim "I held Intel the whole year." And technically, they would be correct.
Bob, you and I are in the same boat with our investments now. . . it has taken me the whole month of September to jockey for the hand I want to hold going into the autumn. I am happy with it. . . provided of course I am correct.
And if I am incorrect and we begin to see weakness prevail throughout the first week of October, then a re-think will be needed of course. HOWEVER, it is part of my job to make decisive moves as a barometer for others to gauge the weather of the markets. And despite the warnings which forced some selloffs, I am fairly confident that we have more sunny skies ahead than cloudy ones.
I believe that we will move forward this week, with the FOMC meeting leading the way. And . . . well. . .I've said all this before so lets look . . . back on September 17th, this is what I said. Notice the reference to Intel or others turning markets "bloody very quickly" should they warn.
---->snip<-----[from Sept 17]
But there is a blinking red light in mid-October which could go either way. . . depending on earnings traffic and Asia. Then November is simply too early to tell, since we need to first know how October earnings play out and what oil does. But November is historically the best month for trader/investors. And I stated that I thought these earnings warnings would continue to be a non-event. . . so I am optimistic.
I further stated that if we get green lights across the board, we could cruise the high road right through October turmoil and past the election and begin to work on those new highs from spring.
However, it is our job to look at both sides of even the most optimistic coin. So if some major companies like Cisco, Intel, MSFT or AMD were to come out with earnings warnings, things could turn bloody very quickly. That is the risk of these high stakes markets. Likewise, if oil persists in the high $30's per barrel well into the autumn. . .we could see inflation fears return, which would squash the strongest of fall rallies. . .and keep us in this horizontal trading range prison.
And if we were to see oil prices actually continue to resume their CLIMB, making even more new highs leading into the FOMC meeting. . . then hope could instantly turn to fear. . .as we would be thrust back into our trading range jail . . .without passing "go" or collecting our $200 bucks.
So I am "cautiously" optimistic moving forward. . . and will be weighing one major market factor against the next. . .until we begin to see a more clear path for our steps down the road less traveled. . .or until some catalyst [namely the buy volume that historically hits during the first week of October when the REAL players return from summer vacation. . .or the word "neutral" used in anything published by the Fed at the FOMC]. . knocks us back onto the super-highway.
--------->un-snip<-----------
So oil is still a concern, but is calmed some from two weeks ago. And I pray we do not go to war with Iraq over it.
We had our earnings warning which knocked us off-track. The markets were taken down to levels where we could now absorb any further shocks. And now October is here. The FOMC meeting is the first Tuesday in October this year. . . and the election is the first Tuesday in November. On the plus side, the tech market is quite low here and the FOMC meeting could likely cause a rally, if they were to take the neutral stance I am hoping they take.
But if they do not. . . and earnings begin coming in low to neutral. . by the first few big techs who report. . . then suddenly Asian woes, the Euro and oil will all be second page news to the tech dump.
Should this worse case scenario play out, there is the possibility that techs could drop further in October. . . testing the April lows. . .as hard as that is to imagine. We should know one way or another this week, so stay tuned. . .This is not the week to walk away from a fully invested portfolio. This is a critical week to the direction of techs. . .and will require our best guns attention on the markets.
I remain hopeful. I remain cautious. I remain bullish towards the future yet ready to turn on a dime once more, should we not experience a rebound from these levels this week. I will hold my hand through FOMC without a rally, but NOT into the earnings season without a rally. If we don't rally off FOMC, I'll immediately turn neutral, and should the first major earnings report [does anyone know who that is?] be disappointing, I would begin to go selectively defensive.
NOTE: I say "selectively" since some of our value plays are as defensive as it gets. . . and frankly, I am fairly confident that the mix of tech value and extraordinary growth stocks that I hold will withstand much of the October turmoil. . . [not holding any swing trades, so I would mostly just need to go short techs as a hedge for my long positions.] Though I will be ready for anything, since October can move sharply in either direction.
So let the discussion begin. Stay tuned to these important upcoming market events. And best wishes to all.
Rande Is |
