To: Micawber who wrote (2728 ) 4/30/1999 6:13:00 PM From: michael r potter Read Replies (2) | Respond to
-OT-with implications for SFE. The rotation from high growth-high PE and into Low PE/value was halted today. Does this mean the end of the rotation? Through yesterday the Nasdaq 100 [QQQ Naz.100 trust] had gone from 114 5/8 to 104 1/2, a 9.5% drop in a few days, while the value/cyclicals were on a tear. Nothing goes in a straight line, and the market was ready for a reversal. The bounce in QQQ was targeted to reach 108 .40. It hit that within the first few minutes of trading and provided tremendous resistance which was never breached. [Am currently short the QQQ as outlined in trading strategy, previous post, with a 108 7/8 short term stop]. SFE followed this pattern with a rally attempt that also failed. Unless its price and volume performance, can prove otherwise, still defensive on SFE. More anecdotal evidence of the strength of cyclicals/value: Yesterday Texaco was hit by major downgrades. It pulled back briefly then plowed ahead for a third day of solid gains. Todays Wall Street Journal commented that "...the oil, basic materials, and economically sensitive stocks are starting to look pricey to some." and " Those undervalued "cyclical" stocks aren't looking so undervalued anymore." When these stocks started moving up in earnest a few weeks ago, the attitude was hmm, interesting, but it won't amount to anything. Now the attitude is wow, nice rally, but they are fully priced, so its to late to get in. These attitudes, [including the Journals implied negativity] are highly bullish from a contrarian standpoint, implying substantial gains ahead after a well deserved period of digestion. One stock that is the key to holding the growth stock story together is MSFT, so far it has bounced off $80 support twice. If it breaks below that, it would be quite negative for the whole Nasdaq 100 index] OT -follow up: Night Trimark $153 3/16 +$5 15/16, and Southwest Securities SWS $52 15/16 + $5 15/16. NITE up over 50% in 7 trading days. Should go substantially higher, but would now confine new buys to below $120-$130, should it pull back for any reason. Still one of the most explosive earnings stories I have ever seen. SWS, should also go a lot higher, but would confine new buys to around $50 or lower. [Their holdings in NITE alone, now worth over $24 per SWS share!] By the way, Barrons highlighted JimCallinan, manager of the Robertson Stephens Growth Fund. His biggest holding...NITE. Also Merrill Lynch has made a "slight" revision of their '99 engs. est. Was $1.70, Now $2.60. "00 was $2.15, now $3.05. Absent a bear market, IMO, NITE could earn $5-$7 per sh. next year on a pre-split basis. This is not hype for my benefit. NITE trades in the millions of sh. daily, and anyone reading this will have virtually no effect on the price by buying or selling. Just trying to alert others on this board, whom I have come to admire and respect, about what has so far turned out to be a gold mine, while SFE shares are taking a break. For the record, SFE still my biggest $ holding. but have to judge direction by the evidence. If the market proves the conclusion wrong and the evidence supports it, will change in a heartbeat. As I have said in the past, mixing hope and ego into the investment mix is a very dangerous combination. They are best checked in at the front door. Have a great spring weekend. Mike
