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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Monty Lenard who wrote (24890)	8/22/1998 2:43:00 PM
From: James F. Hopkins	Respond to of 94695

Monty; The magic ten did not come from any deep analysis of the issues. When I perceived that index funds had a MO MO effect on the index I set out to validate my perception, and simply took the Top 5 caps out of the NDX 100, which were tech stocks and looked at the top 25 of the S&P and tried to stay with the big caps & not duplicate the techs but bring in a sort of mix. ------------------- So they were not picked for P/Es , or any of that just mostly a large market cap mix but a little tech heavy. Prior to this I had tracked the HFX super cap index and noticed it lead the market up and down. I wanted a few more stocks than the HFX had but was still concerned if I didn't stay with large market cap it would not validate the MO MO of the index funds. Well it more than validated my idea of what was going and that MO MO would over ride FA. I'm sure with more consideration I could have found 10 stocks with more ROI, but they would not have been as conclusive in proving the predominance of the MO MO effect over FA which was my main objective. Had I included an objective of ROI while I would have stayed with MO MO, and large caps, but I would have dropped down some and found some runners that were making suitable gains in market cap with a rate showing they would before long challenge the leaders. But I had my doubts these would produce the leading indicator I was wanting, particularly in down turns. Indeed they might not turn down before the leaders, they may even benefit some from the leaders pulling back. So the magic ten became a way to second check the HFX super cap index, more than just 10 good stocks to invest in , as I could find perhaps better, they appeared to lead the herd both ways.. mostly due to indexers. Playing these would then amount to market timing to get the desired effect , and to exploit the indexers, you would buy the dips, but exit with the early warning they gave. It would have been easy to avoid the 97 OCT sell off, these started down well ahead of that. They showed the April decline ahead of time, as well as the July decline, yet with each they stop first and hold as the rest of the market goes on down, they then start to make nominal gains in a relatively flat market before the next run up. -------------------- To pick runners for a longer term approach, would entail more than I want to try to fully explain, but the up trend ratio of the issues picked would have their market cap ( not price ) exceeding the market cap of most of the leaders "if projected forward." The market cap gains would still be more important than price gains, and the cap increase would be curve , apples to apples. In this way I would fish down stream from the Fat Cats, but not so far down as to miss out on the MO effect. Ever mind full that trends are friends to be embraced, not fiends to be fought, catching a new trend is the trick. The internuts I missed, and now seem to be in a market of their own, playing them one would have to specialize in that field. Jim PS we have been getting much needed rain !!!! I never figured I would be this happy to see a storm. -------------