|
PureBytes Links
Trading Reference Links
|
A couple of observations to add to yours.
There is a gentleman who plays the January bounce every year. But it
actually begins in November. (Since many mutual funds fiscal year ends
October 31.) His basic criteria is to pick a stock that has had good
earnings growth over the last few years, has lost equity value by more
than 20% and Value line gives it a 1 for timeliness. As far as I know
the stocks that he suggested this year have not done so well. (I think
he did 21% last year with this method.)
So in a nutshell the "Value" stocks for the January bounce were fewer to
chose from and didn't fair as well.
I do think the momentum players will play the tech stocks but I think
that these guys are not going to hang around for too long. With the
earnings season coming soon and the Asia crisis still ahead I think bad
news will push us lower.
Harley
Ralph Volpe wrote:
> We have all heard, "buy the rumor, sell the news." We'll the latest
> rumor is that tax selling occurs in late December and that January
> sees
> a strong advance as buyers step back in; hence, the large number of
> CALLs. The public is expecting to capture the January buying surge as
> has happened for a number of years now. However, my analysis of market
>
> conditions doesn't concur with this hypothesis. Here is why. Since
> 1997
> has been a very good year for the market most participants are holding
>
> profitable positions, which doesn't add up to large sell programs to
> capture capital gains losses in late December. Heavy tax selling would
>
> occur only in a year in which the market performed very poorly and,
> therefore, many investors would easily be able to roll losses into new
>
> issues with equally good potential for profit in the upcoming year.
> Therefore, with most investors holding winners, the strategy (I think)
>
> is to take gains by selling in January! This would conveniently allow
> the capital gains to fully work for the investor into the tax
> reportable
> time frame of April '99, which gives a nice tax-free holding period to
>
> leverage the gains into larger profits. This is NOT being talked
> about,
> and again, it's the sheep (the CALL owners) being lead to slaughter
> with
> the media circulation of half-truths and invalid assumptions.
>
> However, having said all of this, I still think the market has an
> upward
> bias for several reasons. First, there is heavy volume on advances and
>
> lower volume on declines, which is opposite to what would occur in a
> weakening market. Secondly, the Dow Industrials should be the last
> index
> or average to peak as astute investors recognize the overall signs of
> a
> telltale market collapse and flee to quality, which has always been
> represented by the Dow leaders. This is not what has happened as of
> yet.
> Finally, I believe that as the tech issues have lead the market higher
>
> they will also lead it lower. However, with the recent blood bath in
> tech issues and no real significant correlation or follow along by the
>
> general market, a dynamic divergence has occurred that I believe will
> only result in a snap-back of the techs with a consequent sling-shot
> effect to propel the general averages to new all-time highs.
>
> Ralph Volpe
|