Search results matching tag 'Alexander Elder'

Watch One Particular Stock Market Guru!

RichardSchwartz — Fri, 14 Aug 2009 13:36:00 GMT

AN HISTORIC GURU VIEW. Written Friday morning, August 14^th, 2009.

Being in and around the stock market for the last 35 years -- I can’t believe it’s been that long! -- I’ve seen market gurus burn hot and cold. In my early years I was in more of a daze, doing ancillary brokerage jobs rather than following the stock market closely, just trying to figure out the whole brokerage industry. What a stock broker did, etc. Did I want to be one? Would I be recommending my own stuff? And again not being in New York city, the epicenter of finance, I was on the outside looking in. Even today that’s ones largest hurdle. So anyone wanting into the business I’d advise going where the action is, New York or another financial center like London. If not New York or London are not for you, find a big firm, say a big mutual fund family and get to its headquarters, be it in Boston or Singapore, etc. Anyway, back to point.

Granville & More. I’ve seen Joe Granville burn hot (and drop his pants to show stock quotes on his boxers and walk on water on a hidden board) and turn ice cold in popularity and heard about Jim Dines. I used to follow that curly haired woman guru, yes, that image is bringing her name back, Elaine Garzarelli. For many years I read Richard Russell, one of the deans of newsletter writers and whom I modeled my own letter after, took sample letters to numerous letter writers including Ned Davis, Dan Sullivan, Harry Schultz, Norman Fosback, Lou Navellier, .Marty Zweig, Stan Weinstein and unearthed Ted Warren’s one book (one of my favorites) and read everything I could find. I like William O’Neal’s approach and regular readers know I use and recommend his paper and its IBD 100 list. Having an economics background I gravitated to Ed Hyman’s work and read a number of economist A. Gary Shilling’s books. And read John Naisbitt’s Megatrends series with his long range projections. I’ve read and studied all the Dow theorists from Dow to Hamilton to Rhea to E. George Schaefer to Russell. I continue to read many new guys too, Alexander Elder, “Trader Vic” Sperandeo and on and on. Etc., etc. etc. Many unknown letter writers too. I really could throw a ton of names around if I sat down and reviewed my stock market library and mine and other’s old market letters. So I’ve seen many gurus come and go and burn hot and cold. But one who I continue to admire and track is Bob Prechter of Elliott Wave fame who was the #1 guru way back when. He was a major market mover like Joe Granville. While he uses charts -- which Wall Street loves to disdain, I think that’s mainstream Wall Street spinning a veil and case on the public to justify their big bucks, they all surreptitiously use ‘em -- Mr. Prechter also is now ties market swings to societal mood changes (which makes good sense to me). And is in the process of attempting to add and formalize to current investment analysis the concept of tying stock market trends to mood shifts. “Go for it Bob!”

SCHWARTZ RECOMMENDATION: TRACK MR. PRECHTER GOING FORWARD!

Anyway, I have to strongly recommend keeping one eye peeled on what Mr. Prechter is advising right now. Especially now! I’ve related the histories of Granville and Dines going terribly wrong in this letter, getting stubbornly bearish right at major market bottoms, so I realize the danger now for Prechter in remaining so adamantly bearish but I can’t fault his analysis, what he’s saying and my 35 years in the business tells me to not pooh-pooh his foresight. After reading everyone I can and adding in own my market intuition formed over those 35 years in and around the stock market, I’d say he’s on track. So I’m with him and the other bears, Jim Rogers, Marc Faber, Gary Shilling, the Comstock guys and others out there, still recommending extreme caution going forward. Remember us outsiders were bearish but correct at the July through October 2007 bull market peak while most of those bullish today were also bullish back then and missed that major top completely. Amazing! I mean even after the subprime disaster unfolding ahead became plain in August 2007 and on the head fake rally to new highs in October 2007 they remained Pollyannaishly [sic] blinded. (And no, for all you individual investor skeptics out there about Mr. Prechter’s work, and I know there’s a lot by reading the responses and comments now added at the end of most all Internet carried research, no I’m not a shill for Prechter. Never met, emailed or corresponded with him at all.)

So, yes, play this rally which will likely run longer than most bears think, but stay near the exit; somehow!

For a FREE sample of my daily, emailed stock market letter and advisory, email me at RichardStk@aol.com.

Weekly Monday Overview

RichardSchwartz — Mon, 06 Apr 2009 13:17:00 GMT

Richard Schwartz's

PRINCIPLES OF THE STOCK MARKET

A learning, teaching, always evolving stock market letter and advisory service

Eighteenth Consecutive Year of Publication; Letter #1; September 18^th, 1990

Post Office Box 1236 · New Paltz, New York 12561 - U.S. A. · (845) 255-6894

E-mail address: RichardStk@aol.com

Subscription · One-Year Morning E-Mail Delivery · $150.00

Monday, April 6^th, 2009: It’s Master’s week so I’m pumped up. It’s golf’s 1^st major of the year, tradition packed, for you non-golfers. Should be great with Tiger back, Phil Mickelson saying he’s playing the best golf of his life, Paddy Harrington going for his 3^rd major in a row and lots of up & comers. All I can say is wow! Even just watching this old southern flower nursery turned into a golf course in the spring, lavished with money for decades, may be worth the watching for any non-golfers out there. For me, it’s just heaven.

THE KEY QUESTION

Instead of discussing The Big Picture today, let’s focus on The Key Question. Since that’s what I keep pondering. Plus it has to be on every investor’s mind as well. “Could this rally be the start of a new bull market?” To intelligently answer -- as during every bear market rally -- necessitates rehashing all the available evidence. I can make a solid case for a cyclical bull market having just started and I can make an even more solid case that this is just a normal bounce in a Papa Bear market. Consider:

MINI BULL MARKET HAS STARTED

·        The economic stimulus is now starting to kick in which will stabilize and bounce the economy.

·        The monetary stimulus, lower interest rates, is also now kicking in and housing sales are increasing.

·        Inventories have been drawn down and need to be restocked which will pump up GDP growth near term.

·        The US and other governments have done everything possible to mitigate this downturn.

·        We now have more coordinated and get along global leadership than in many years.

·        The US economy has proven itself wonderfully resilient to shocks in recent decades.

·        Markets can counter-swing at any time for long periods, posting mini bull markets, versus primary trends.

·        Almost two years has passed since the beginning of the credit implosion back in July 2007.

·        Many independent market gurus think the March 2009 lows will last for a good while, months or longer.

·        The latest government bailout plan has more enthusiasts and support for it than previous plans.

·        Oil stopped falling back in December and is now on the rise possibility indicating growth rebounding.

·        We have recently had a number of better economic data reports from both retail and housing.

JUST A BEAR MARKET BOUNCE

·        The bear market hasn’t lasted long enough to discount all the problems that have come to light.

·        More problems, coming as bearish ripple effects and because of long lag times, are due to show up.

·        The bear market hasn’t fallen deeply enough to factor in the sudden massive shock to the global economy.

·        There hasn’t been enough overall selling or liquidation for a solid bottom. Stock and mutual fund liquidation haven’t reached previous classic big bear market bottom levels.

·        No solid bottom appears on the charts. We need a climatic sell off or a long low volume erosion to bottom.

·        Interest rates have to go up at some point, soon – either with and because of an economic rebound or from panic selling -- which normally depresses stock prices because of this new competitiveness from bonds.

·        The American consumer has suddenly stopped spending. This has slowed down business all over the world and finally exposed the global imbalances problems. Too much manufacturing in China and Asia and too much spending coming from America. Now those imbalances are being forced to readjust. Takes time.

·        The stock market is ignoring soaring unemployment. Yes, employment is a lagging indicator but continuing jobless claims isn’t. A new report just out says that in coming weeks and months, hundreds of thousands of jobless Americans will exhaust their unemployment benefits. Finally, 600,000 new job losses each month is going to add to weaker consumer spending, problems for local communities and cause negative ripple effects.

SCHWARTZ CONCLUSION: In review, we started this big bad bear market back in the year 2000. That was the peak of the last big bull market and thus the beginning of this big bear market. This is evidenced by the benchmark S&P 500 Double Topping in March 2000 and October 2007 and then subsequently and decisively breaking below October 2002’s previous decade-long lows by over 10% in March 2009. Showing that since 2000 and the ending of the Internet boom we’ve really been living on lower interest rates and big tax cuts, a false, “pump me up,” house of cards. Really not any wealth building going on, just paper shuffling to make things look great fueled by easy money credit creation. But now reality has set in. Thus, looking around, we see we’re almost nine years into a bear market which has been interspersed with one bull market, running for five years. So stocks were down almost two & a half years, up five years, now down about another one & a half years, sort of repeating The Visit of the Three Bears. In that infamous and extended bear market run of nine years, netting a -50% loss, there were two cyclical bull markets sprinkled in and surrounded and book-ended by the three bears, Baby, Mama and Papa.

My conclusion remains that this bear market is not over. But that the form and shape of it may get tricky going forward. Because the market has a history of posting cyclical or short term or mini bull markets on the way down when the bear gets ahead of itself. Which is why the stock market remains so fascinating!

THE ECONOMY

Well, the BUZZ has died down about how the economy is slowing its prior quick rate of descent. Guess because we’ve started seeing more bad economic data pop up or because the conversation has moved on. But some investors have decided an end to the economic collapse is out there, just over the horizon, so they are shifting into cyclical stocks now as a result. One can see this money rotating out of defensive sectors such as medical care, consumer staples and even gold. You know the concept, buying in advance of a recession’s end since history shows stocks rise roughly six months before the economy turns up. But if we indeed are stuck with a very mild even “anemic” economic recovery, as many figure, then stocks could also soon level off to mirror that trend as well. That is if the economic and earnings data don’t start sinking fast once again showing the economy is still sinking. For example, last Friday it was reported that the ISM Non-Manufacturing Index which now measures almost 90% of America’s economy - America now being a service oriented economy instead of a manufacturing economy - fell faster in March than in February somewhat debunking the idea that the economy has stabilized. Schwartz View: Yes, there is the possibility that economy-wise we are going to V- back up because sharp moves, in whatever areas of endeavor, are generally followed by responding sharp moves back up. We’re seeing that now in the stock market but after this bounce is over, I agree with the camp forecasting an anemic slow economic recovery.

THE STOCK MARKET

The stock market extended its rally to four straight weeks last week. We did see the first crack in this rally a week ago when the market fell sharply for two days. But then we quickly rebounded to new rally highs. That’s normal, the first crack being overcome but it does show this rally may be starting to struggle. We are getting closer to my minimum upside targets of Dow 8303 and S&P 1627, closing Friday at Dow 8017 and S&P 1621. And one can note trading volume has been slowing some, another sign of sluggishness. Or maybe cautiousness. Makes sense as we’re now moving into another corporate earnings reporting season starting tomorrow, the 1^st quarter January-March 2009 report kicking off after the close with Alcoa (AA), traditionally the first of the 30 Dow stocks to report. With the fall-off-the-cliff economy occurring early in last year’s fourth quarter, it only stands to reason that investors have to be wary of forthcoming earnings and thus wary of this rally as well. Schwartz View: It looks like the stock market has some more strength left in it so with stocks already having rallied beyond the 50% retracement level from their latest leg down, the early January peak, the teeter-totter phenomenon comes into play. Getting halfway up means it’s very likely to go all the way back up. Thus we kick off this week at roughly another key Fibonacci 61.8% price in both the Dow and S&P 500. That’s about 8088 and 838 respectively. If we break through those levels, then the next target is those January highs, Dow 9088 & S&P 944. Not guaranteed but increasingly likely.

PORTFOLIO STRATEGY

2009 may indeed prove to be the year to trade. If stocks fluctuate but go nowhere net, up or down, for many months ahead then it’s going to prove very frustrating for investors. In these times and they do happen, more often than the uninformed investor may realize, the best way to make profits is to: (1) trade individual stocks and (2) discipline yourself to continuously fade the market, buying on dips and selling on strength. Toward that end I’ve started incorporating the Commodity Channel Index (CCI) technical indicator into my work. Comes on most charting services like Bloomberg. Basically it shows deviations from the moving average, when stocks get too far overbought or oversold. Naturally you buy when a stock or index gets oversold. For more on the CCI I suggest getting Oliver Perez’s Swing Trading Tactics DVD or Alexander Elder’s book TRADING FOR A LIVING. Over the last month of rally for instance certain stocks have far outperformed the averages. And numerous tradable asset classes or market sectors like the US dollar and oil have been both up and down offering trading profits but no net profits for buy & holders.

Otherwise than scalping profits what should we do? For now favor the long side and the cyclicals. I like technology, renewable energy and natural resources. Move up a notch in your market exposure to about 30% if you haven’t already but continue to hedge your bets and don’t get out on a limb by going too long. Just subdue your ego, don’t think you know more than Mr. Market does and just go with the flow, modestly. Bottom line take what the market gives you, right now there are some trading opportunities but don’t get carried away. There’s lots more trouble to come but the path ahead is likely to get more tricky as well. So don’t fall into the camp that says “fool me once, shame on you, fool me twice shame on me.”

Have a good week!

Go Tiger Go!

Principles of the Stock Market: Sample

RichardSchwartz — Tue, 06 Jan 2009 14:56:00 GMT

Richard Schwartz's

PRINCIPLES OF THE STOCK MARKET

A learning, teaching, always evolving stock market letter and advisory service

Eighteenth Consecutive Year of Publication; Letter #1; September 18^th, 1990

Post Office Box 1236 · New Paltz, New York 12561 - U.S. A. · (845) 255-6894

E-mail address: RichardStk@aol.com

Subscription · One-Year Morning E-Mail Delivery · $150.00

Tuesday, January 6^th, 2009: OK, back to the rat race. The weather remains ugly. Yesterday am it was all ice. Tonight it seems like snow, then severe ice again tomorrow morning. This is the time of year I wish I lived in southern California or other warmer clime. Still, tiny New Paltz is a college, mountain town with open space, a walk around lifestyle so Lucy & I are there for the duration. Of course with beach vacations.

UPDATE ON THE STOCK MARKET. The latest gigundo $800 billion economic stimulus plan, now called the Obama Recovery Plan or some such, as he puts his fingerprints on it, may cause a bigger stock market rally than I previously thought, I realized last night as I watched the Nightly Business Report (before I got in the bathtub with reams of printed research to read). The Nightly Business Report (NBR) showed very wide differences in economic growth rates. Much stronger economic growth with the plan. Or rather much less economic weakness with next year showing positive Gross Domestic Product (GDP) with the plan and negative GDP without. Now I know the National Bureau of Economic Research (NBER) just said we’ve been in recession since December 2007, sort of bypassing the outdated GDP stat altogether but not every investor realizes this yet. CNBC and other financial media still take the easy way out, constantly stating a recession is two consecutive quarters of negative GDP, but as Peter Schiff writes in his latest book, THE LITTLE BOOK of BULL MOVES in BEAR MARKETS, most government stats are really skewed, biased toward what government wants to say, today. Also please remember, a stronger GDP really measures mostly spending … and overspending which is what we’re trying, what we need for the sake of America’s future, to get away from. More investing our money, not spending (blowing) it on unneeded gadgets, etc. But that’s a story for another day. Yes, what a mess!

THIS RALLY. Right now I can visualize stocks rising right into Senator Obama’s inauguration on January 20^th as the 44^th US president. (Obama as US president? Amazing!) Stocks rise as the plan comes into clearer focus, and as it becomes -- hopefully, cross fingers! -- a non-ideological, non-partisan bill. Hey, many Republicans should be very happy to come on board as surprise tax cuts are included and surprises also about the large size of the tax cuts, importantly including tax cuts and larger depreciation write offs for business! (We have to encourage, not discourage, business to invest, just the opposite of what FDR did during the 1930s.) Schwartz: Myself, I love what I’m seeing from our president-elect. Press conferences actually focused on improving America, not arguing among parties, open and honest talk and also a proposed web site so Americans can see where each of our dollars is going. “Go America Go!”

RALLY ENDS WHEN? Then maybe it’s all over, this bear market rally ends on inauguration day or shortly thereafter, say when the bill gets passed. But if those GDP interpretations I saw on NBR last night are reasonably correct ( it will take much time to discredit and change how we figure GDP to make it more relevant again) then maybe the US economy gets a sizable lift which lasts for some longer period of time before our still emerging problems pull us back down again. If that happens I can see a mini bull market or cyclical (short term) bull market unfolding this year, say starting back at the November 21^st intraday lows.

Schwartz View: Bottom line, my best recommendation this morning is that traders and many slightly longer term investors too get further reinvested back into the stock market. Not 100% for sure yet but higher exposure than in a long while. When? Say right now or very soon. Many key market indices and averages confirmed this new rally once again, on the first trading day of the year, last Friday. That’s the exact point – when we have a “Trader Vic” identified change-of-trend in place, we do, along with a higher low followed by a higher high, we do, and then we get another breakout move up and above that higher high (like occurred last Friday) – where correct strategy is to invest more.

ECONOMIC VIEW. Like I noted yesterday, I’m seeing more and more record statistical drops, like yesterday’s drop-off-the-cliff report from the auto industry; Chrysler leading the way down with a year over year drop of a mere 53%! My point is that just like the phenomenon in stocks when the economy drops fast it may also have a tendency to bounce back rapidly. I note some are now saying the same for oil, using history of something called the forward curve of futures prices. Of course this almost automatic, stock rally back likely doesn’t go all that far. Just like when a car crashes into a wall, bounces back, but still in drive, comes on again. Depends on how bad the crash was on how long the engine keeps running fueling the bounce back. Schwartz View: I have to think this financial crash of ours was extremely bad. Still I can see another big stimulus plan, if pointed at and framed correctly, using our brains and learning from past mistakes, doing a lot to produce some positive stats for a time after implementation.

TECHNICAL VIEW. Many Individual Stock Charts Looking Good! I drew up charts of almost all 100 companies on the latest IBD 100 weekly computerized list of leading stocks, stocks with good fundamentals and generally leading the market upward, yesterday afternoon. And I must say most now look good. A few of them are even already back above their highs set BEFORE the October panic sell off. That’s one of my parameters for possible buying as per my Principle of Relative Strength telling us what to buy. As to what other technical screens I used as I reviewed their charts on two charting services I get, Bloomberg, and for FREE on www.Marketwatch.com, I used RSI and DMI primarily. Briefly RSI stands for Relative Strength Index, it’s an oscillator, and measures market consensus psychology. While DMI stands for Directional Movement Indicator and is a trend-following indicator showing how fast a trend is moving and thus when a trend is worth jumping on board. Traders of all sorts should be familiar with both indicators I’d say. I would recommend Alexander Elder’s 1993 book TRADING FOR A LIVING as the best reference I’m aware of to bone up on these and other indicators.

Here’s a listing of a few companies and their underlying industry sectors which look ripe for trading this latest rally. Remember Investor’s Business Daily turned bullish, put the bull back in the box, back on December 3^rd and hasn’t been forced, by stocks hitting lower lows, to take it out since. This is a major difference for months prior to that. A bullish change. So let me post some stocks which look good to me.

Disclaimer! I own none of these stocks today but am considering buying a package of about three to five today or soon. Please remember my positions can and do change without notice.

IBD 100 STOCKS LOOKING TEMPTING

Market Industry

Price Cap Ranking Business

SXCI SXC Health Solutions 19.03 455m 2 Pharmacy Services

LPHI Life Partners 42.27 502m 3 Insurance Brokers

ESI ITT Educational 92.28 3570m 5 Schools

TWGP Tower Group 28.74 700m 8 Property/Casualty Insurance

HOME Home Federal Bancorp 10.65 184m 11 S&L/Thrifts-Western US

VSEC VSE Corp 42.34 215m 18 Engineering/R&D Services

SXE Stanley, Inc. 35.74 839m 18 Engineering/R&D Services

SYKE Sykes Enterprises 19.65 810m 18 Computer Services

AVAV Aerovironment Inc. 39.38 831m 23 Aerospace/Defense

TDG TransDigm Group 35.00 1703m 44 Aerospace/Defense

NPK National Presto Inds. 77.88 533m 63 Aerospace/Defense

NCIT NCI, Inc. 30.66 410m 70 Computers-Integrated Systems

SXL Sunoco Logistics 48.80 1398m 90 Energy Pipelines

CMP Compass Minerals 63.12 2046m 117 Quarrying

Schwartz View: It’s been some time since I posted stocks off IBD 100 weekly list. Because of this bear market. But this rally looks like it may just have some legs and my market philosophy is to play all decent looking rallies, modestly. I would thus suggest a three to five stock trading portfolio chosen from the stocks above. Some points to keep in mind. Don’t overdue it! We’re still in a bear market after all and one which looks to have more downside, even if it doesn’t come immediately. Also remember IBD recommends investors always focus on the top 40 or so industry groups. Finally, look for a quick +10% profit but cut your losses, individually or whole port6folio-wise, quickly. Remember we just might be starting some type of cyclical (short) bull market now but, on the other hand, the odds still favor much lower prices over time. So participate but always concentrate on your downside, how much you could lose.

Good trading! Have a great day!