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Non-Tech : Dorsey Wright & Associates. Point and Figure -- Ignore unavailable to you. Want to Upgrade?

To: Augustus Gloop who wrote (2916)	12/13/1999 3:17:00 PM
From: Ms. X	Respond to of 9427

Here is another example of "From the Analyst" I wanted to show what kind of very important information is listed in this section of DWA. The DWA analysts work hard to keep everyone up do date with the market risk and action so there are no surprises. This was posted on December 1st. From the Analyst 12/01/1999 Choose an Archived Report Ready For A Breather -------------------------------------------------------------------------------- There's been a lot going on with the indicators recently and today we wanted to provide you with an update. I've heard more comments from brokers and investors like "if I could bottle up my returns from November and make just half of that every year, that would be fantastic," "my accounts are up 90% this month," "the amount of money I've made during in technology stocks in the last six weeks is astronomical," and so on. You get the idea. The indicators are suggesting that we might be in for a pullback or a breather. The NYSE High-Low Index and the Percent of Stocks Above Their 30 Week Moving Average have both reversed down into a column of O's. The third short term indicator is the Optionable Bullish Percent and it has not reversed down yet. The other good news is the current levels are low. The NYSE High-Low Index is at 25.6% and the Percent of 10 is at 41.5%. If the reversals were coming from high levels of 70% or more we would be much more concerned. As well, the NYSE Bullish Percent remains in a column of X's. That means the overall bias is still upwards. We have outlined before how this market reminds of 1994-1995. In 1995, the NYSE Bullish Percent remained in a column of X's from February until October. During that time, the NYSE High-Low Index would pullback but each time the pullback resulted in a higher bottom. In other words, the market took breathers along the way. Stocks are just like people - they inhale and exhale. We can't ask the market to run a 26 mile marathon on one deep breath at the beginning of the race. Pullbacks will provide you with opportunities to initiate new positions in stocks which are technically strong but maybe just a bit extended at current levels. This brings us to our next point, sector rotation. This week we began to see some sector rotation in some of the strongest sectors, Semiconductors and Internet stocks. Both of these groups rallied near 70%, Semi's to 72% and Internet's to 68%, and then reversed down into a column of O's on their sector bullish percent charts. Typically reversals like this suggest a move to the 50% level on the sector bullish percent chart. The relative strength charts of these sectors remain strong and in X's so that suggests it will be a pullback rather a complete washout in the sector. Many of these stocks are at the top of their ten week trading bands. Most stocks want to reside at the middle so that means one of two things must happen. First, the stock could pullback to the middle of the ten week trading band. The pullback would bring strong technically sound stocks back into buyable ranges with better risk-reward ratios. Second, the stock could consolidate and the trading band could shift (because volatility is a part of the calculation) t o where what was 100% overbought becomes normal. The consolidation would provide a base from which the stock could make it next upmove. In summary, don't throw out the baby with the bath water. Follow your game plan. If you have stocks that are up 30% or more, take partial positions off the table. One of the things our money managers do is take 1-3 of the position off the table when the stock is up 30%, another third off when it is up 50%, and hold the final third as a core position. This allows you to hold onto great long term plays like AOL for the full ride and then you can always trade around the core position. For new positions, we try not to buy in sectors which are extended. If you are looking to buy stocks in the Semiconductor and Internet sectors, keep your powder dry and wait for these stocks to pullback to strong support levels and the sector bullish percents to get back to lower levels. With the NYSE Bullish Percent still in a column of X's we think pullbacks will be buying opportunities and bias will remain upwards. Stick to the game plan and you can navigate any type of market. In the next coupl e of days look for a list of technically strong stocks to buy on pullbacks.