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Since the major averages are above their 200 day moving averages,
there is little doubt in my estimation that the bull is alive and
well. The fact that the bull market is intact is confirmed by the
high level of the McClellan summation index. Also, the Nasdaq
market just recently set an all-time high. A change of leadership
is taking place as the Dow (large-cap) stocks are moving sideways to down
and the smaller cap stocks are taking the lead. This is shown clearly
in today's issue of Investor's Business Daily chart of comparative
relative strength. During this correction, comparative relative
strength of market sectors should give us a clue as to which
sectors to invest. The better performing sectors include the
energy services sector. Also, natural gas has sprung to life.
The fundamentals of most stocks in these 2 sectors are very good
with peg ratios of less than one in many of the securities.
At 02:08 PM 8/30/97 -0400, Jim Greening wrote:
>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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