*AV*--Yesterday's edition that I did not post here (sorry).
The Radar System Trader, a PICS Publication
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September 1, 1998
The Charade Parade Gets Unmasked
Listening to all the rumblings laced with "bear" is almost humorous. If ever there was a clue to not follow the crowd, this is it.
Yesterday's rout was truly nothing more than a belated and much deserved cleansing of the street's dirty little shell game that has been going on for some time.
Months ago, I pointed out that the institutions were buoying the weighted index and leader board stocks, while sweeping their chips off the table in those stocks out of a less liquid broader market. It was only a matter of time before the roof pancaked.
Yesterday's free-fall of these heavily weighted leader board stocks came as no surprise to this writer. Since early May I have been emphasizing the divergences between the broader markets and this "Charade Parade" that has been veneering the underlying weakness that was expanding. In the interim, I have issued several strong recommendations to reallocate a portfolio mix to higher cash positions along the way, as these divergences widened.
The time is drawing near to be able to finally put that cash to use, but not quite yet. I have a saying, "never be in a hurry when heading for the casino" and today certainly would be appropriate.
This is not a market environment to second guess. Not for investors, nor positional traders. This is a reactionary market whereby only the most adept and talented traders should venture on a moment to moment basis.
I am sure that the market consensus is that we will open dramatically to the downside with buyers coming in mid-day. I say phooey. My guess is that the buyers will be there at the opening bell pushing the market up fast, only to be met with sellers as we head into the close.
Guesses all.all guesses. and to second guess this market would very likely end up being terminal to your financial health. Granted the higher the risks, the higher the rewards, but the downside here is unknown and the upside is limited at best. I would strongly encourage anyone to think twice before venturing into this quagmire of beguiling entrapment.
One only needs to keep in mind the rapid decent we experienced in the last hour yesterday, falling almost 300 points in a swirling vortex of escalating velocity, to justify any temptation to participate.
Does Edgar Alan Poe's "Decent Into a Maelstrom" come to mind?
On a cheerier note, I continue to remain bullish, and view yesterday as being "a reality correction" that was long overdue.
Most major corrections take about 5 months to heal. But listen-up, and pay attention to what I am about to say.
The major correction actually took place 4 months ago in the broader market. All the way back in month of May. That is what I have been adamantly stating for months, it is only now after yesterday's free-fall of that "Charade Parade" of stocks, that everyone is drawing attention to it like it is something that fell out of the sky from nowhere.
Give me a break!
I feel that we will now experience wild fluctuations in the process of trying to regroup over the course of the next six to eight weeks. Further deterioration of even another 1000 points are possible based on a couple of key international events, such as the one such wildcard being Russia. This could thrust a large stick into our spokes, upsetting any realm of predicative analysis you may want to apply. But even so, I feel that we will start to truly recover some time in late September to mid October, and rallying into years end.
It is hard to visualize now, but all this global financial chaos will come back to benefit our markets in the months ahead.
Here are three compelling reasons why I feel the bull will continue to run:
1.) Interest rates
2.) Foreign investment in the US markets
3.) Companies doing major share buybacks
For right now, I would only consider playing intra-day trades and not be tempted to carry any major positions. To nibble on some well known and stellar performing company for the long term is certainly a consideration, especially at bargain prices. Just remember the keyword is nibble, as it will allow you to average your price in case you find yourself premature in your commitment.
Let's see how the today plays out, and feel free to join us in the #radartrading real time chat-room on the Undernet server during the day, for play by play action. By the way, in yesterday's market we were able to profit by more than 7 « points, both long and short various issues. So please use this added value service to help maximize your returns.
Have a good day.
Raleigh
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AV's Briefing
Radar Trader Newsletter
High Tech Commentary-- Scan List
September 1, 1998
OPENING COMMENTARY FOR September 1, 1998 - Andrew Vance
The major markets collapsed once again today blowing off a great
deal of its remaining gains it had for the year. Records were created as the dash for the door continued. Things are not exactly looking rosy anywhere. To go forward with any type of stock discussion today
based on the events of yesterday would be ludicrous and misleading. Any list generated might be a good tool for some day-traders but I do not think it would help the positional traders.
Stocks are selling at lows I never expected to see so I think that
anyone who was interested in putting their cash to work should place it with their favorite company and to hell with the experts. My only
word of caution is to try to wait until you are sure the market has
turned to the positive direction. Make sure your stock is travelling in the correct direction as it seems that the shorters are the only ones making money.
My thoughts are that today might show some strength after a morning
drop. I think you will see further deterioration as the margin calls are taken care of from yesterday. The indiscriminate selling of stock
to cover margin calls will cause an early morning sell-off, in my opinion.
The target of the 7700/7800 has been reached and now we might see
a SLIGHT recovery. The market is still a play where you should be buying your groceries and be extremely careful if you are buying stocks. Those that are in cash will be presented with unique opportunities down the road to leverage themselves to riches over the next 5 years. It is important not to rush to invest and not to force any trades. Patience and abstinence has been a virtue these past few weeks. You have seen the shift in the discussions and topics here so you know we have not been bullish but, rather taking a more defensive posture. Enough Said!
TIMELY TOPICS
REXI(13-15/16, +7/16)-- in a sea of red ink everywhere, these guys had an up day. Amazing is the only word to describe it. But then, how much
lower could it have gone. That makes this stock up +3/4 over the past
two trading days and still trading large volumes of shares.
PWJ-No news and we reported on Friday that it made back 5/16 of the
5-1/8 it lost on Thursday of last week. I stated on Friday, that I
couldn't wait for the "boiler room" operations touting this stock to get back to me today. Well, they did and we went the rounds. Oh, I guess I should tell you that PWJ(35,-4 7/16) took a real dump today along with other financial stocks. Well, screw the rumors. We are down close to $10 on a "sure deal" even with Deutsche Bank AG (DBKG.F) apparent acquisition overtures towards PWJ. I asked them why they were
pushing this stock so heavily and their response was "It was a great deal in the mid $40s and it just makes it super fantastic in the mid $30s." They tell me how smart I was to wait and how NOW is the time. Before they started their heavy tactics of the polite badgering and whining and cajoling, I asked how many people bought shares from them last week. Sure enough, they admitted a whole lot of people and he was just getting back to the ones that did not participate last week. TRUE STORY. So why am I printing it??
RULE#1 - NEVER EVER do business with boiler room operations or any fast talking, smooth talking, lots of noise in the background type of individuals. Especially if they have the hard sell, if it is important
that you jump on the bandwagon NOW. If you cannot be given at least 1-2 days to do your own investigations and research, or even a few hours and call back, there is something potentially wrong. Who knows if they are dumping stock for a client or trying to get shares under their control to short down the road. So, never conduct business under pressure. If it cannot be delayed for a few hours or a day or two, it may not be worth it in the long run.
JNJ-KO-AXP-GE-IBM-MCD-MRK-T-WMT to name a few, took massive hits today. No surprise since most of these are DOW stocks. However, why did they drop as much. Sales of Big Macs in Russia are off that much
relative to the rest of the world or the USA??? Obviously Wal-Mart in
Russia and Korea are in the throws of bankruptcy. Whoops, I guess there are no Walmarts there after all. And of course we have all stopped shopping at Walmart and stopped taking the kids to MickeyD's. And to top it off, we no longer use band-aids or any of the other JNJ products. Makes sense to me that all in one day, this becomes intuitively clear to everyone.
By the way, I did not want DELL, YHOO, AOL, BRCM, GCTY, XCIT, CRB, AAPL, INTC, MSFT, WCII, or XIRC to feel left out. They got crushed today also. I guess there won't be too many PCs under the old Christmas tree this year after all. Valuations in the Internet market may become a bit more realistic. Well, it might actually be justified here since many of these stocks were vastly overpriced.
DY(27-5/8,-2 5/8)--This is a core holding of mine that got ripped today. 52 week high was ~$37 and I have been holding this stock for 18
months, almost to the day. I am was at $10 so it is a great profit for me.
However, stock was down today on early news. I want you all to figure
out why this stock dropped today, given the news release. I won't provide any details other than the link. ENJOY!!!
marketwatch.newsalert.com
CIEN(28-1/8,-7 3/16)--left the best for last. The day-traders were picking this puppy apart most of the day with great success and then WHAM BAMM, it was gone. The fortunate ones that were short at the time are out celebrating while the long holders licked a few minor wounds. At last count, they had taken CIEN for about $3 today and I would assume they were on the side at -1/2 to net $2.50 for the day. Of course, with the share ratio for the merger announced, we don't have to tell you what happened to TLAB today.
RADAR TRADER RST SCAN LIST COMMENTARY FOR SEPTEMBER 1, 1998
No discussion will take place in this section today and I give you a list of multiple choice reasons. Pick the one you like best.
A. I did not receive the list.
B. I went to bed prior to the list being received.
C. The list should not be discussed given the market action today.
D. We were working on the Launch of this Newsletter.
E. The dog ate the list or the computer corrupted the list.
AND NOW A WORD FROM THE RADAR ROOM:
Radar is an appropriate word here since that was probably what was used to detect the "accidental" fly by of a North Korean ballistic missile over Japan. Whoops, I wonder how that could have happened??? North Korea was in really bad shape even prior to the start of the "Asian Crisis". People were starving and the military was barely being fed. So why you think things cannot get any worse, we have the lunatics rattling their sabers.
Even the "nice guys" are having trouble. Apparently Yeltsin's choice of Prime Minister went over a well as the missile did over Japan. I wonder if we can get a translated copy of a Russian newspaper. I want to read the Classified Ads section for Garage Sale items like weapons, gold, diamonds, nukes, mercenaries, etc.
UPDATE of Friday's 3 companies:
MRVC(5 19/32, -1 7/32)--shares were down again after a 53 percent drop on Friday, after the company warned its third-quarter revenue and income would be lower than expected. Just more follow through as the other shoe drops and MRVC gets caught in yesterday's mayhem. We are about a 1/2 pt way from some serious stuff kicking in like it no longer being marginable and it dropping off the screens of those institutions that do not and cannot solicit purchases of stocks under $5. Heaven help them if they run into NASDAQ de-listing issues.
UTEK(17-5/16,-1 9/16)--further collapse of this stock on the heels of
their third quarter charge in connection with a 20 percent cut of full
time employees.
Xoom files for $46 million IPO--Internet community company Xoom Inc. filed with the Securities and Exchange Commission for its IPO. This was last Friday. Betcha they change their minds govern what is happening to their peers over the past few days. They may take the Pointcast road and withdraw either looking for private funding or better market conditions.
Andrew Vance |
