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Strategies & Market Trends : Pump's daily trading recs, emphasis on short selling
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To: Michail Shadkin who started this subject6/24/2001 9:26:21 PM
From: Michail Shadkin  Read Replies (2) of 6873
 
My thoughts on the Russell additions stocks and WEBX:

The final list of the Russell index additions does not come out until July 9 after the close.
So far it has been just a preliminary list.

Here is an interesting note put out by Merryll Lynch on June 14:
Merrill Lynch notes that stocks being added to the Russell 2000 have outperformed those being deleted by 29% from the end of March through the end of May; argues that the more pronounced Russell effect this year might lead to a more severe reversal with deletions outperforming additions going forward.

The above statistic actually makes perfect sense.
Deletion list is full of dead stocks, mostly real pos stocks that have failed or failing in their business plans.
While the additions list contains on average, stocks that have not faired as badly and have a certain minimum market cap (I think 140 million, but I could be wrong)

It would make perfect sense that one would outperform the other. This really doesnt say anything.

So the list has been around since end of March.
After 10 weeks of being on the list and over 2 weeks before the final list WEBX makes a 50% move before retreating from 29.86 high.

I am not buying this theory at all.
The move in WEBX had nothing to do with the Russell index in my view.

I dont know why WEBX had the giant move, but probably just a major short squeeze after momentum players started piling into it.

Tomorrow I am planning on covering my shares of WEBX from 29.75 around low 24s and holding the rest of the position and thus improving my cost basis significantly.

Late friday afternoon they seemed to have broken as some momentum day traders decided to move on. More will leave tomorrow.

Michail
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