GFS
Interested to see discussion on pennies. When I started playing these cheapies, back in Dec. 1999, I played them
exclusively as I discovered for myself the percentage gains
possible were mind-boggling, compared to the more commonly accepted Gamour Stocks, which it seemed was a struggle to make a 10%-50% gain in a longer time-frame. It was my observation at the time and my opinion now, that once these
speculative shares started heating up, the market was in a
booming kind of phase, with money spreading around throughout the market. Now, with the bear loosening it's grip on price action (price from the Sept. decline trendline threatening to break up), and pennies busting loose from the corral once again (who left the darn gate open!), it appears to me we are
once again entering an upward advance phase of the broader market, or we are entering a perverse sort of sector rotation again, with the pennies being one of the prime beneficiaries
(this would make no sense to me). As I played those kinds of stocks exclusively during the Dec.'99 - March 00 runup, and was becoming quite efficient towards Feb (better late than never) in selecting candidates
(the S.I. stock screener was awesome for selecting pennies about to pop) and playing them for huge gains, I believe the knowledge acquired during that period will serve me well here as I see the same phenomenon occurring again. At the time, I would select a basket of 6 or so at a time, making roughly equal investments on each, moving profits into others when the desired move occurred. I would describe the event as a type of contagion, first a few of the more desirable? or
popular? catching fire....spreading to other stocks which had not popped yet, but perhaps were still building bases. This
spreading around period lasting several months becoming more and more pervasive until at the end, when the bears' deathgrip on the market took hold. Then, they ALL came a-tumblin' down. In the early months, the stock screener would bring up a handfull of candidates; towards the end the list
was tediously large. When the $hit hit the fan, the screener had zero results! To give you an idea of what kind of gains were possible, I will mention that I was a beginner in the world of trading equities. I am largely a self-taught kind of guy, and had to pick my way through the mine-field of
possible trading mistakes, and I would say I was extremely inefficient in the earlier months. In spite of my errors,
I was able to increase my trading capital nearly 900% in about 3 months. Not bad for a beginner! It gives me goosebumps to think what might have been if I had my game figured out towards the beginning of the Penny Poppers as
opposed towards the end. Also, you can imagine yourself how
this beginner fared when the whole market game changed and I
began learning the hard way what a bear-market was. Without my prior witnessing firsthand the boom to bust cycle, I was unprepared to keep most of my profits. Fortunately, I did not lose it all, and even better, I still have the knowledge which allowed me to achieve these results and the means to do it all over again. I've got to say, with the market action of the last two weeks, I see the whole darn thing starting up all over again. I pretty much figured that when "they" killed my golden goose, I was not too encouraged that I would get another chance so soon...
While as you say, the booming of the pennies is a sign of a top?, I would say that as was noticed by me from the last time, this period could last months. Also, as the market doesn't feel too "toppy" (VBG) right now, I don't think the
sentiment is particularly valid, or at least timely.
Another observation is that back in dec '99, the fed had been
pumping the money supply(y2K), something that as Haim's chart shows is occurring once again, but perhaps not as dramaticly.
Also, if my memory serves, weren't interest rates being raised to cool fears of an overheating economy? Now, we have the lowering of rates in addition to increasing money supply...perhaps a recipe for a powerful market advance.
I am in full awareness that the trend-break is not official yet, at least not in my technical book, so caution is warranted. However, I am very encouraged and excited by the prospects I see unfolding. It is also my belief that now that these animals have been let out of their cages, so to speak,
they will have to be allowed to run their cycle through again to the end (and this time when the music stops, I will not be left standing without a chair to sit in). I believe we are only now beginning....
During the wee hours this weekend, I intend to make time to
rework the screener I used to allow for some ideas and improvements I have thought up during the winter of the stock market. If anyone is interested, I will make my results available for anyone who cares to look it over. Objective criticism is desired as I believe my idea is valid but perhaps can be improved.
Anyway, the developments of the last week or so in the market has me very excited and motivated once again.
:-) :-) :-) :-) :-) :-)
Best Regards To All
Eichler |
