Market Wrap up - What to expect for next week....
Well, it was a great week! The market rallied strong and is within the shadows of its previous highs. There has become a great divergence between the high performing stocks and the lackluster ones. The recent strength in the dow and sp seems to be concentraded in a few of the best stocks, ge, ibm, the airlines, the financials and dell. For the most part though, many of the stocks trading more than 30% off their highs have not participated in the recent rallies.
Part of the reason for thismight be window dressing, mutual funds kicking out the dogs, the cabletrons, the wdc's, seg's etc. and replacing them with the dells, ibm ge, lu's for year end reporting. On Dec 31st, they can run their reports show their 20-30% return and ooh and aah investors with their holdings of dell, ibm, etc. The investor does not know that the 30% was actually 36% until the hard drive sector and cs or oxhp. Better to show 30% with dell and ibm and intc than 30% with wdc and seg. Soothes the mutual fund investor. Gets more investors and more expense fees and loads.
What does this all mean. I think you might see a strong surge for mutual funds to get the averages up to their year highs before year end (heck, we might be there on MOnday) which, we when break the year high, we might break out hard to the upside with an upside blow off. After the new year, with tax selling behind us, small and mid cap to-date underperformers might start performing which might broaden the advance of the market and create a more stable base rather than this pointy tower of ibm, dell, the financials and the drugs.
Today's rally was strong and the momentum will hopefully carry through the weekend. Many have felt that when a market does not move higher on good news, that is bad. When it moves higher, like today, on a bad (or good depending on how you look at it) unemployment report, that is overall positive.
This bull market has legs, has taken its correction in good order, has shaken stock from weak hands to stronger hands, and should hopefully rally another 200-300 points before year end.
Penny stocks - there are a number of great opportunities in penny stocks. I would never recommend them to anyone, yet, I on occassion invest in them and do OK, nothing special. The key I have found is to own enough that if 8 out of 10 go nowhere or down, the 2 that pop make the profits. The 2 that pop, if they are good usually can cover the losses on the 8. Nonetheless, generally speaking, while there could be great opportunities, most of these stock stink and are more likely to go to zero that double their current price. When you trade pennies, be accepting of their going to zero. That .20 cent stock that goes to .0002 valueless except that the bankruptcy court hasn't ruled on who gets the two 386 machines and the photocopier that were left in the offices.
If you like, trade crap, but buy and own quality. As shown over the past few weeks, quality comes back. Good companies with good management and good revenues come back. Some of these 5,6,7 dollar stocks may never recover.
Great dialogue. Nice to see we have gotten back on track.
Hope everyone has nice weekend.
Once again, the trin and the ticks were critical to a number of successful entry and exit points today. When the market sank after Mr. Bill Clinton spoke, down to about +63 from up 85ish, the trin slowly started moving lower again, indicating upside volume was coming back in. The market surged to its highs before selling down at the close. For all those that haven't done so, I suggest putting the tick and the trin on your screens and learning what they mean and how to use them.
Regards,
Steve@yamner.com |
