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

To: Ms. X who wrote (7108)	4/5/2000 12:50:00 PM
From: Rich1	Respond to of 9427

Obviously I am still learning. hopefully one of these days will get it right.

To: Ms. X who wrote (7108)	4/5/2000 12:58:00 PM
From: Ms. X	Respond to of 9427

March 30th report on the OTC and market in "From the Analyst". It is important to read this section daily. From the Analyst 03/30/2000 Some Thoughts On the Otc Market With the action in yesterday's OTC market we thought it would be beneficial to postpone our discussion of Step 2 in the game plan (Sector Evaluation) and hopefully clear up some questions about Thursday's OTC routing. The Calculation of the OTC Bullish Percent The OTC Bullish Percent is an equal weighted index. In other words, one stock = one vote. The Nasdaq 100 is a capitalization weighted index where the bigger the market cap = more votes. In Monday's report we had a piece called "Do You Know Your QQQ's?" which addressed this. In the NDX, the top ten stocks account for 45% of the movement in the index. Those top ten names can move in price but not have a material affect on the OTC Bullish Percent which counts about 3000 stocks in its universe. Stocks are going to pullback but what is important to us is whether the pullbacks produce sell signals. If they don't then it is just a buying opportunity. If the pullbacks begin to produce sell signals than that gets our attention. The net of the buy and the sell signals are in the OTC Bullish Percent each week. The net buy and sell signals brings me to my next point and that is once a stock goes on a sell signal, it vote has been counted. It can give multiple sell signals but each subsequent sell signal doesn't affect the OTC Bullish Percent, only the first time the stock goes from a buy signal to a sell signal and vice versa. For instance, look at the chart of Broadvision (BVSN) below. This stock gave the first sell signal at 82. There it moved from a buy signal to a sell signal and thus affected the OTC Bullish Percent. There have been two more sell signals after the first one and the stock has fallen from highs of 93 to 50! That's put a real hurting on anyone portfolio to ride BVSN down from 82 to 50 but after that first sell signal at 82, the stock's action didn't affect the OTC Bullish Percent. It won't have any effect on the OTC Bullish Percent until the stock goes back to a buy signal. So you can see how a stock can have real negative affects on your portfolio but not affect th e OTC Bullish Percent. Now take a look at the chart of Autodesk (ADSK). This stock just moved from a buy signal to a sell signal and thus affected the OTC Bullish Percent. Of course, before deciding whether you want to take profits or hedge you will want to look at things like support, resistance, and relative strength. On the DWA Internet Charting System you can get a feel for the new buys versus new sells each day. In order to access this go to the main page and then click on "Bullish Percent Charts." The furthest column to the right under the heading "Dly % Chg Status." This is just a sampling of the buy and sell signals for the previous day's action. Keeping a running total would give you a pretty good idea of where the bullish percent readings are going for the week. Keep in mind it won't be exact though - it's just a sampling and e only do the bullish percent readings once a week. Broadvision Inc - BVSN 95 ------------------------------------------------ 94 93 X 92 X O 91 X O X 90 ------------X-O-X-O----------------------------- 89 X O X O 88 X O X O 87 X X O X O 86 X O X O X O X 85 --------3-O-X-O-X-O-X-O------------------------- 84 X O X O X O X O 83 X O X O O X O 82 X O O X O 81 X X O X O 80 ----X-O-X---------O-X-O------------------------- 79 X O X O X O 78 X O X O X O X 77 X O X O O X O 76 X O O X O 75 ----X-----------------O-X-O--------------------- 74 X O X O 73 X O X O X 72 X O X O X O 71 X O X O X O 70 ----X-----------------O-X-O-X-O----------------- 69 X O X O X O 68 X O X O X O Med 67 X O X O X O 66 X O X O X O 65 ----X-----------------O-X-O-X-O----------------- 64 X O X O X O 63 X X O X O O 62 X O X O X O 61 X O X O X O 60 X-O-X-----------------O-------O----------------- 59 X O X O 58 X O O 57 O 56 O 55 ------------------------------O----------------- 54 O 53 O 52 * O 51 * O 50 -----------------------------O----------------- 49 48 * 47 * 46 * 45 ----------------------------------------------- Autodesk - ADSK 60 ------+-------------------------------------- 59 \| 58 \| 57 \| Top 56 \| X 55 ------+-----------------------X-O------------ 54 \| X O 53 \| X O 52 \| X O 51 \| X O X 50 ------+-----------------------X-O-X-O-------- 49 \| X X O X O 48 \| X O X O X O 47 \| X O 3 O O 46 \| X O X O 45 ------+-------------------X-O-X-----O-------- 44 \| X O 43 \| X 42 \| X Med 41 \| X 40 ------+-----------X-------X------------------ 39 \| X O X X 38 \| X O X O X 37 \| X O X O X 36 \| X O O X 35 ------+-----------X-----O------------------- 34 X X X * 33 O X O X O 2 * 32 O X O X X O X * 31 O X 1 X O X O X * 30 ----O-+-O-X-O-X-O--------------------------- 29 \| O X O 28 \| O * 27 \| * Bot 26 \| * 25 ------+---------*---------------------------- Evaluating the Total Picture If you have been reading this report or have attended one of our training classes, you know that more goes into deciding whether to buy or sell a stock than just whether it is on a buy signal or not. The same goes with the overall market. There are several things we look at with respect to the overall market and sectors other than just the bullish percent readings. Here is a quote from recent "From the Analyst." Excerpt from March 15th 2000 "From the Analyst": It has been a powerful market for the technology area over the last couple of years. We've certainly had dips during that time in which positions could be established at better prices and that is what is appears will happen again - we'll get a chance to buy some quality stocks in the technology areas at lower prices. The OTC Bullish Percent has reversed down into a column of O's, and so have many of the technology sector bullish percent charts. I know it might be heresy to think that technology stocks would go down but remember that volatility works both ways. Just as easily as these stocks go up 50 points in a day, they can go down 50 points in a day. We saw it on Tuesday with the Biotech area. It is important to manage your expectations. When the indicators begin to suggest high risk it is more important than ever to manage expectations. If you look at many of the technology charts you'll see the first and second sell signals being given. Look a little closer and you'll see the next support area is 30 or 40 or 60 points below. I just had a conversation with someone who just couldn't believe this particular stock had 30 points of risk down to the next support level. When we laid out the evidence - the stock had just given three consecutive double bottom sell signals, made several lower tops, the relative strength chart was weakening, and the weekly momentum had turned negative - it was clear the stock had a lot of risk. I posed the following question to him, "if I covered up the name of this stock, is it one you would want to leave in your portfolio without taking any protective measures?" The answer was pretty apparent. If a stock(s) in your portfolio has given two or three sell signals and made several lower tops, that's your warning sign. If need be, cover the name up and then evaluate it. You have to make decisions in the market based on the information you are given at the time. No one has a crystal ball....Don't be a deer in the headlights. Now is the time to do a portfolio review. Which stocks are vulnerable and could be used to raise cash and which ones are holding up? There were a lot of relative strength reversals down this week so that could be a starting point for deciding which stocks to take some profits in. Use this reversal down in the OTC Bullish Percent as an opportunity to weed out the weak performers. When the NYSE was correcting sharply a couple of weeks ago the weak relative strength names were the first to get hit and it wasn't pretty. Spring is just around the corner and now is a great time to do some spring cleaning in your portfolios. Volatility The analysts here at DWA look at hundreds of stocks each day and the ones people are hitting the most on the site are four letter stocks that break you out in a cold sweat looking at the volatility. Volatility is a two-edged sword. Stocks that can go up 50 points in a matter of a couple of days can also go down 50 points in a couple of days. You have to be very diligent about managing your clients and their risk tolerance. I dare say if you ask yourself, "Will I sleep at night knowing my stock has the potential to be cut in half in a matter of a couple of days?" that the answer would be an enthusiastic no. That's not to mention your mental health knowing you're overweighted in these stocks in your portfolio. I guess some of it is lack of fear. There are so many people today who have never seen a bear market that lasts any amount of time that they have no fear of prolonged down markets across the board. Of course, there has been sector rotation where some sectors have seen their own bear markets two most notable of late are the Bank stocks and many of the consumer related issues like Coca-Cola (KO) and other food stocks. The banks now appear to be emerging from their bear market. Some of the retail Internet names have been experiencing their bear markets. CD Now (CDNW) has fallen from the upper 30's to 3 in a year's time. I guess the business model really does still matter - at some point you have to start making money. In fact, I was reading an advertising magazine the other day and they were listing "10 Suggestions for Dot-Coms Annual Reports" and while some of it was tongue-in-cheek, it does reflect pretty accurately the thinking of many investors. One tip said, "use a serious tone and deliver a sensible explanation when describing your stock's 500% run up in the past year." That tip was followed by another which stated, "manage expectations for next year when the stock price might only rise a measly 30%." Even in the tremendous bull market we have had during the past nine years, the average return of the S&P 500 is 18.65%. For the Dow Jones it is 18.20%, for the Value Line it is 17.98%, for the Nasdaq Composite it is 32.5%. And that's with an incredible bull market and no serious bear markets yet! The Nasdaq Composite Chart (NASD) We also received a lot of questions on where the next support levels for the Nasdaq Composite would be. On the DWA Internet System you can pull up the chart of the Nasdaq Composite under the symbol NASD. Looking at the 50 point per box chart we see that a spread quadruple bottom was broken at 4450 and now the next support on the chart is at 4300. After that, next support would be at 3750. On the ten week trading band, the Nasdaq Composite has corrected back to "normal." The 100% oversold level would not be found until 3450. There is still room on the downside that the Nasdaq could fall. When do you get back in? We will wait until the chart begins to consolidate and give us a buy signal off support. 5250---------------------------------------------------------------------------5250- 5200 5200 5150 5150 5100 X 5100 5050 X O X 5050 5000-----------------------------------------------X --X O ----X O ------------5000- 4950 X O X O X O 4950 4900 X O X O X O 4900 4850 X O X O X O 4850 4800 X O X O X X O 4800 4750-----------------------------------------------X O --O X O X O ------------4750- 4700 3 O X O X O 4700 4650 \| X X O X O X O 4650 4600 \| X O X O X O X O 4600 4550 \| X X O X O X O X O 4550 4500-----------------------+---------------X O X O ------O --O --O--------- Med4500- 4450 \| X X O X O 4450 4400 \| X O X O X O 4400 4350 \| X O X O X 4350 4300 \| X X O O 4300 4250-----------------------+-------X O X --------------------------------------4250- 4200 \| X O X 4200 4150 X X O X 4150 4100 1 O X O X 4100 4050 X O X X O X 4050 4000-----------------------X O X O X O X --------------------------------------4000- 3950 X O X O X O X 3950 3900 X O X O X O 2 3900 3850 X O X O O X 3850 3800 X O X O X 3800 3750-----------------------X O ------O ----------------------------------------3750- 3700 X 3700 3650 X 3650 3600 X 3600 3550 X 3550 3500-----------------------C --------------------------------------------------3500- 3450 X Bot3450 3400 X 3400 3350 X 3350 3300 X 3300 3250-----------------------X --------------------------------------------------3250- 3200 X 3200 3150 X 3150 3100 X 3100 3050 X 3050 What Do I Do Now? Hopefully you were looking at the charts of the stocks you own and evaluating those for potential risk versus reward and taking chips off the table on sell signals. If so, you are probably still a little beaten up and bruised but there's cash on the sidelines and you've starting buying sectors like banks and finance and retail that are doing quite well. If you thought it might be different this time, some portfolio might be a little more than beaten and bruised up. Now you have to deal with the situation and make the best decisions based on the information at hand. Obviously we aren't seeing the percent of OTC stocks with strong relative strength or positive trends improve. That could very well last several more months. It is important to still evaluate your stocks based on their charts, relative strength (which is very important in down markets), and trend lines. For instance, Novell (NOVL) has broken down several times, violated its bullish support line and now its relative st rength chart reversed into O's. That's an instance where something should be done to mitigate the risk. Let's say on the other hand you have a stock that has been beaten up already like Puma Technology (PUMA). This stock has fallen to 52 on the chart and looking at the 2 point per box chart, the next support level is at 38, just above the bullish support line. That's still a lot of room, 27% in fact, to fall so a logical course of action would be to at least lighten up especially on any bounce. On the other hand, look at the long term chart 5 point per box chart of Yahoo (YHOO). This stock is now right at the bullish support line so it would make sense to give this one a little room here. Take it on a case by case basis and make the best decision you can with the information at hand. Stocks will bounce up but evaluate those bounces to see if they produce buy signals or just lower tops which is what we have been seeing over the last couple of weeks. Remember, we can always make up opportunity but it is hard to make up money. Letting a stock get cut in half on you means you have to double that money just to get back to even. Copyright ¸ 1995-2000 Dorsey, Wright & Associates, Inc. Disclaimer.