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Dan,
I know we have discussed this on the phone, but I thought I
might share this with the group. The following approach has
returned steady profits (10%+/month) during the last 18 months.
A. Analyze the indices and discern market direction by applying
the tools that you are most comfortable with and have been the
most reliable.
B. Screen for: "most volatile" issues.
C. Initiate positions in issues that have topping or bottoming
patterns that imitate the indices.
The degree of success will be predicated on one's ability to
apply the proper tools to the indices and issues. Sound simple?
Yes. Will people take issue with this approach? Probably.
I attended a dinner party last night at, Washington State
University, and a professor argued with me about how "yuppie"
401k money would fuel the market to "infinity". This same
individual received the following email from me on 7/21
(reprinted in part):
"We've finally approached an area that has me concerned in the
Dow. All my technical work is pointing to the downside since
Friday and I knew it would take a few days to set up. That
brings us to yesterday, today, tomorrow...or very, very soon.
Look out below. A correction would do this market good."
This prof would rather argue and defend his positions, than
analyze and be flexible (he's one of these recent "market
geniuses", created in the last 8 years, with the buy and hold
strategy). It's tough to argue with someone who's used to
making 30% for the last couple years. My, how quickly the
market regurgitates 10% "chunks". We're going down hard in
September. After this "consolidation", which started on 8/5, is
completed, look for topping action in the indices and
immediately start screen for securities with the largest
volatility. If they also have technical topping patterns...sell
short. You ain't seen nothing yet.
Steve Karnish
CCT
----------
> From: HARELSDB@xxxxxxx
> To: metastock@xxxxxxxxxxxxx
> Subject: Re: Weekly Pick (long)
> Date: Thursday, August 20, 1998 11:47 PM
>
> In a message dated 98-08-20 03:44:11 EDT, you write:
>
> << Pretty hard to support your contention, Dan -- most hedge
funds recognize
> and capitalize on some stocks going up while others go
down to achieve
> their superior performance.
> Livermore (Lefever) and crew faced simpler opponents in
simpler times.
>
>
> JMHO Bob >>
>
> I have given this a little more thought and I believe I have
come up with a
> probablistic argument that I think is difficult to refute.
>
> 1. A positive beta means that a stock moves in the same
direction as the
> market.
> 2. Most stocks have positive betas. (I found 588 stocks in a
database of
> 11,000 that have betas less than or equal to zero.)
>
> Conclusion: A trader that takes a position in a stock in the
same direction
> as the market is moving has a higher probability of success
because most
> stocks move in the same direction as the market.
>
> Please post if you see a flaw in my thinking.
>
> Dan
> Pocatello, ID, USA
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