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Strategies & Market Trends : Dave Gore's Trades That Make Sense -- Ignore unavailable to you. Want to Upgrade?

To: Dave Gore who wrote (3363)	3/2/2002 4:30:48 PM
From: Dave Gore	Respond to of 16631

COMMENTARY ---- THE WALL STREET GAME: What 90% of the Public Doesn't Know Wall Street is highly profitable for a select group of high powered firms and individuals. Their profit depends on volatility and market nervousness. Even CNBC and brokerage houses depend on it, as we have discussed, to increase viewership or the need for a so-called "professional" broker to protect us in this tricky Market. Volatility is a wonderful thing for creating wealth for these few, especially when they often know which way the a stock or the Markets are going to go and when. How do they know that? Because they help create it. Rumors come from somewhere, the asbestos scare (now fading) came from somewhere, as did those who decided that they could really help tank stocks by spreading accounting rumors in a Market that was already incredibly nervous. Often they just help create a mood, a tone that sets a series of events in motion. One fear lasts a while, fades, and then a new one is created. They also do well because they don't need big moves to make a lot of money. Unlike the small guy who might be able to buy 100 or 500 shares of stock XYZ, they can buy 5,000 or 50,000 shares and make a killing off even a small move. They just have to be a little right to make $10,000 or $100,000 or more in a trade. Remember, if you have a very good idea which way a stock will go and when, you have a pretty high "Reward to Risk" ratio, don't you? And even if they don't create the rumor or the market-moving news, they get word of it first and can often enter a trade with a 1-2% head start over the rest of us. For those in control, it is better to have the Market go up and down as much as possible. This creates more buy and sell opportunities. It helps create situations whereby they can panic the small guy and even the fund managers more easily. Witness the storage sector last week. They shorted EMLX to $31 and then went the long the other way. Ditto QLGC, which gained about 8 points from low to high on Thursday and Friday. They used the emotions of the many to tank the stock and then bring it back up so fast, and they lead the way in both directions. This is nothing new to most of us, both some still don't "get it." They can easily create both "panic buy" and "panic sell" scenarios in this nervous market. They can make everybody on edge and get many to they trade with their emotions. They have helped create the climate that says, "You can't buy and hold" anymore, it's too risky!" The fall of GNSS only magnifies this. Still, the naive daytrader looks for big gains and gets too greedy, failing to realize that in this market the "REWARD to RISK" ratio gets rapidly worse on the long side the more a stock rises. They need to learn to be more satisified with smaller profits. But most never will. The naive Mutual Fund or 401K investor may have time on their side (if they have 10 or 20 years), but averaging into the Market starting back two years ago (as they were advised) hasn't exactly been a strategy that's worked either, unless they were in the right funds, and most weren't. Certainly tech, biotech and energy stock performance have been pretty pitiful. What's the moral? I say either watch the screen everyday and do complete T/A, fundamental, and psychology sentiment analysis and be very ready for the right entry and exit point (i.e. be able to do great R/R analysis) or choose your Mutual Funds very carefully and be satisfied to wait a few years for your stocks to make any headway in your Mutual Funds. Or, 2% on CD's. Also, do not be greedy. The day will come that the Market will go up strongly and we can all relax a bit and even hold stocks for the longer term, but from what level and "when" it's hard to say, especially in tech. Over-valuation brought thousands of stocks down by 30-90% in the last 2 years, but many are still overvalued. Some however, like WM, may be incredible bargains right here. It's all a game and one that is stacked against the average investor. To survive and prosper, you have to be very good and work a lot harder at analysis.