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All,
I've been trying to decide if we were still in a bull market, a bull
market correction, or a bear market and I've decided I'm still on the side
of the bull. Let me walk you through my logic and see if you agree. First
of all, my portfolio hit an all time high Friday, so we must be in a Bull
market <G>. Next, the breadth of the market is still positive, more
gainers than losers. Then, the Russel 2000 set a new all time high Friday.
Finally, the number of bullish investment advisors fell to 32% this week.
That's near an all time low and a very positive contrarian indicator. On
the negative side the nifty fifty have taken some large hits in the past
few weeks. The large cap stocks as represented by the S&P 500 are
definitely in a short term down trend. To me that all adds up as a
continuing bull market which is correcting by sectors. Right now the large
caps are taking hits and the small caps are recovering. Does anyone agree
or disagree? What do you think?
The reason that is important to me is that with that conclusion, I
won't be focusing on shorting the market. I think the amount of new money
still coming into the market makes shorting the market risky right now.
Instead I'll continue with my long positions, but will concentrate on small
caps (less than $1 B) with good fundamentals. I might short an occasional
large cap that I think is way over valued, but that won't be my primary
focus. Back to the picks. This week I'm going with National Technical
Systems (NTSC) which Harry Kobetitsch called to our attention last week and
GT Interactive Software (GTIS).
GTIS at 10 has been bouncing along the bottom of a Short Term Up Trend
Channel for a couple of months. The top of the STUTC is at 14 1/4 and the
bottom at 9 1/2. It dropped from a high of 26 3/4 last October to a low of
5 7/8 this April. It moved up from there breaking out of an Intermediate
Term Down Trend Channel in May and giving a MetaStock ROC, ADXR, S/C buy
signal. The ROC just turned positive after being negative for most of the
last couple of month's sideways to slightly up movement. The S/C is
slightly negative, but flat. The ADXR just dropped below 21 which
indicates no trend now. It all looks like a setup for a breakout,
hopefully to the upside <G>. The fundamentals are good with a PSR 0f 1.62,
PE of 26, Debt/Equity of 0.14, market cap of $624 M, 69% insider
ownership, revenue growth of 56% and earnings growth of 29% last year. I'm
going to open a position Tuesday. I'll set my target at 25, just under the
96 high and my stop under the STUTC at 8 3/4.
NTSC at 7 7/8 broke out to a new all time high Thursday on large
volume after a couple of months of sideways movement. It is in an
intermediate and long term up trend. The top of the Intermediate Term Up
Trend Channel (ITUTC) is currently at 9 1/8 and the bottom at 6 5/8. The
indicators all reflect a strong up trend in progress. Since this is a
fairly narrow ITUTC, I won't set a target, but will set my stop under the
channel. The fundamentals look good with a PSR of o.92, PE of 19.22,
Debt/Equity of 0.66, market cap of almost $46M, 32% insider ownership, and
revenue growth of 13.5% and earnings growth of 73.7% last year. I'll open
a position Tuesday with a stop at 5 3/4.
I'll attach RUT, SPX, GTIS, and NTSC charts in GIF format for everyone
on the email list. If you are not on the list, and want on, just yell.
Jim
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