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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Spytrdr who wrote (10662)	11/21/2000 10:56:07 AM
From: Eric P	Read Replies (2) \| Respond to of 18137

Nice chart. As you point out, analyst upgrades/downgrades are often good opportunities to fade the market. Let me give you my thoughts on why this may be true. Let review the food chain in the stock market. Everything is driven by money, especially analysts. They do research, and expect to get paid for their services. Who will pay them the most? The big boys, of course. They've got the big money on the line and are willing to spend some of it for good information. You and I have peanuts invested (by comparison) and can't afford top-of-the-line and timely research. So, let's assume an analyst finds some exciting good news about a company. Is he going to upgrade the stock and tell the world? Of course not, he needs to make a living. First, he discretely passes the information along to his top customers... huge traders, large hedge funds, perhaps his biggest institutional clients. This largest member of the food chain begins to act on the news and the stock begins to rise. Subsequently, the large brokerage firms may get the news, and pass it along to their largest clients with multimillion dollar accounts (got to keep them happy). Finally, after all of the big money and smart money have already heard and acted on the news, the news, the stock is publicly upgraded for the world to admire. At this point, the little guys have the opportunity to buy the stock for its final rise. We would be foolish to believe that we are getting this 'news' at the same time as everyone else, though. I have always considered upgrades/downgrades to be either worthless, or a good contrarian signal. Thanks again for the link/chart. I'll be interested to see any others you come up with. -Eric