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Strategies & Market Trends : Jim's Nasdaq100 Special as a basket. -- Ignore unavailable to you. Want to Upgrade?

To: James F. Hopkins who wrote (409)	4/18/1999 11:24:00 PM
From: studdog	Read Replies (2) \| Respond to of 2103

Jim, I too have spent the evening looking over the XL's. Like you I like XLE. In addition, I have a strategy regarding XLI for your consideration. While you have found this index to be small cap biased, GE makes up 24% (!!!!) of the index. So, before I even saw your breakdown re cap-size I was planning to play XLI like this: Buy XLI and turn around and short GE. The reasons this may work:1. There is a clear rotation to this sector (see XLI chart) 2. There is a rotation to the smaller companies and as you pointed out there are alot of smaller companies is XLI 3. The mega caps like GE are wavering So, there are a four scenarios, only one a loser: 1.The sector/cap rotation continues and XLI goes up while GE goes down or at least just goes sideways (XLI has been rising despite GE's recent small drop) 2. Everything goes sideways. 3. The market tanks. The "market" won't tank unless GE tanks and I will be short the sucker. 4..We just get more of the same from the last 2 years, with GE getting more overvalued and the smaller companies faltering. #1 of course is my favored scenario and I think the most likely #2 and 3 are also possible but I won't lose much if any capital #4 could hurt but I really think this is unlikely (but not impossible) The real question is, what percentage of my XLI holdings to short. Right now I am considering a 50% short, i.e for every $100 of XLI I am long I will be $50 short GE. Anyway, it looks good to me on paper and I may dive in in a relatively big way. I would really appreciate your as well as anyone else's input. Save me from Folly!! Karl