Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : A.I.M Users Group Bulletin Board -- Ignore unavailable to you. Want to Upgrade?

To: LemonHead who wrote (13159)	10/13/2000 7:24:46 AM
From: OldAIMGuy	Read Replies (2) \| Respond to of 18928

Hi Keith, Like AIM, the IW tends to follow what's already happened. So, once the markets have crested and started to fall we probably won't be selling any more, even with the Idiot Wave still rising for a week or two. Before the crest, we'll usually be getting sell orders like we were in late August and early Sept. With the IW rising, we allow ourselves to continue to sell to meet that ever higher Cash Reserve goal. In the case of my own portfolio, most selling stopped by mid Sept. Then I was left with whatever cash I had from the previous cycle. With the IW continuing to rise, it should be used as a big RED FLAG regarding how soon we start to buy back, how much resistance we have to buying and also to starting new investments without proper analysis. Many of us started new accounts with WCOM. At the time the IW was rising. I did what I consider good fundamental and maybe even a bit of technical analysis at the time. I also used the IW to point the way to 44% starting Cash Reserve. This was even as the stock was way off its former high. As of yesterday with my second addition to that account, I'm very happy I allocated as much cash to it as I did. At this point if one of our stocks became a "Darling" of the market, we'd sell shares as AIM suggests until we hit the 50% mark. This is because the general market has plenty of risk in it. It would appear that the mutual fund industry is still taking in huge amounts of monthly dollars, but the fund managers are cautious about deploying it. That caution shows up as a sour market. It also describes a typical approaching market bottom. Those managers have traditionally been heavy in cash near market bottoms and light near the tops. It's part of the "GroupThink" syndrome that Dreman describes. The 50% Cash Goal indicated by the IW also tells those of us that use the "vealie" that it is prudent to raise cash as AIM suggests to a very high level. Back in June, our target was only 38% Cash before we were allowed to pull "vealies", now it's 50%. The bar was being raised ever higher for us. We don't have it within our power to raise the prices of our stocks, but we do have a plan as to what to do if they do go up. Now with prices falling, we can't make the market turn, but we do have a plan for what to do with our cash as prices fall. The IW's the goal, AIM's the plan to reach it. Near the end of each correction we'll always find the IW rising while our cash reserves are shrinking. Maybe it would help to think of the IW as something like a Storm Warning Flag. Back in June it showed light breezes. By the end of August the flags had been changed to steady 25 knot winds. Heading towards the end of Sept. it was upgraded again. Last week and this we have seen the blow upgraded to Full Gale Warnings, High Tides, etc. This isn't the time to take our speed boat out for some barefoot skiing. Because of the exponential moving averages built into the IW's calculations, it arrives a bit late on the scene for most disasters. Maybe a week or so. It also hangs around a bit longer wanting to make sure it takes in the whole of the disaster! It should start to tail off about a week or so after we see the indexes bottom. Even though the Idiot Wave is suggesting Gale Warnings right now, AIM's been busy bailing the bilge water as the storm has been building. We can't expect AIM to work for nothing, so we've been paying out good hard cash for the effort. The result will be that when the storm passes, we'll have a fine catch to take back to port! We're riding out the storm, but all hands are busy stuffing greenbacks into every crack and crevice to keep us afloat. The SS Buynhold is taking on water and listing badly. AIM's on an even keel and has the bow pointed into the wind. Best regards, Capt. Veale