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| Author: Mike Celeste | Editor: Tony Ponzo | August Circulation: 13041 |
STAT SHEET WEEK ENDING Aug. 6/ 05
**************** Percent / Points
Dow Weekly Change - 0.8 % - 83
S&P Weekly Change - 0.6 % - 8
Nas Weekly Change - 0.3 % - 7
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Comment:
Too much of a good thing?? Trying to figure out what makes the market tick has driven people to suicide--after they have guessed the wrong way--ie. 1929 and other times we don't even know about. At the present time, the economic news is good--
and some are saying that it is too good. When it is too good, the naysayers worry that interest rates will go up, and that is a negative. This time it is earnings and the employment report that are the given culprits. Earnings have been good, no
question about it. This week's employment report stated that U.S. payrolls had solid growth in July, as 207,000 net new jobs were added. Also, the unemployment rate continued to stay at a 40 year low of 5%. It appears that the market makers want a middle of the road policy for the economy. Not too hot, not too cold. Defining what is "too hot" or "too cold" is another matter.
Oil prices hit an all time high this past week, not making for cheering by consumers, that's for sure. Gas prices made their customary jump, naturally, and we have to adjust accordingly.
My take on the markets is that we are at/near 4 year highs on the Nas and S+P, with the Dow struggling to make a new yearly high for 2005. The major indexes were up 5 straight weeks before this past week, besides. Nothing goes in one direction all the time. It is also August, and I just don't like August, and have been saying that to our team members, even by email alert. Nas has gone down in 3 of the last 4 years and the Dow is nothing to brag about. Investors are away on vacation--and that is borne out by emails we receive from our readers, too.
Question--Have you ever felt strongly about the statistical odds, yet had a gut feeling that it was going to go the other way? Well, that's how I feel about August. Our split systems are proven winners year after year, so the rule we have for ourselves is you go by the proven odds we have developed. But, I hate August, and I hate the fact that the markets are so high, and I hate the fact that so many of our split plays are in stocks that are at/near 52 week highs. With all that hate building up, you can imagine what my wife has to go thru. Anyway, we did take the official position of sending an email alert to team members about this and stating that maybe some would want to pull back on the number of shares they bought, or
cut down on the number of $'s they put into each play--or drop the Basic System and play only the Big Dipper System--or a combination of those. We strongly believe that it is extremely important that investors feel comfortable with whatever program they are using, their own or someone else's. As it has been put, we all want to sleep at night.
The danger in second guessing the statistical data is that if you are right when you choose your gut feeling over proven data, you will want to use your gut feeling again the next time the situation comes up. It is easier to do, emotionally. We all know what a tremendous part emotion has in our investments. Ah, if we could only be robots or computers ourselves and
program our brains to do what the odds say. That is an elusive, but worthwhile target to try to achieve.
In the meantime, we struggle along with our human instinct, weaknesses and strengths, and try to do the right thing. This past week we were right with our gut feeling, but I really don't want to feel that it can be done time after time, instead of using systems that work when looking at the beginning of the year to the end of the year, thru good news and bad news, thru
downgrades,weather disasters, political events, etc., etc.
We have tightened our criteria for Big Dippers in order to get more plays and we had 3 new BD's hit this past weak week (got a chance to stick that double spelling in there). That is another reason we mention paying more attention to the Big Dippers.
There are a couple of stocks, in particular, that I would like to mention.
SUN was closed out this week with a very nice profit in both the Basic and Options Systems. There is a little more to the story, tho. SUN hit the Basic and dropped so quickly there were a number of team members that were able to pick it up almost at the original BD target price. They were able to get in around 117-119, and also able to get the options when it was that price. Therefore, they were able to make even more, without the stock actually hitting the BD price. Also, I had mentioned earlier that after a nice 5 points jump one day, and moving over a previous high, we MIGHT see another 5 point run over a short time frame and before sell date. I'm pleased to say that the stock was over 123 at the time and it closed out at 130.60 on sell date. It did a bit better than hoped--and we are thankful. SUN closed the week over $1 lower than our sell price, too.
The other stock is a current Basic and Big Dipper play--HANS. If you remember TASR and how nervous that stock made me, this is a close duplicate. Any time a stock varies within a huge 6 point trading range in 1 day, that makes me very nervous.
HANS has done that--too frequently. On Friday, it did it, and went the wrong way. This stock is listed to close on Monday, Aug. 15, but there is a big barrier standing in the way between then and now. The earnings are scheduled to come out Tues., Aug. 9 in the morning. We all know that earnings releases and the resulting market action are notoriously hard to predict.
Many short-investors don't want to be in a stock when an earnings announcement is released. You never know if it going to result in selling on good news or rising on good news, no matter if the earnings are terrific or not. We had a team meeting about this and wanted to post an exit strategy that would be a change from the posted sell date. The plan was to say that if
the stock reached the 97-98 area, close it out at that price. So, what happened in the meantime? The stock hit 97 or higher the last 4 days of this past week--hitting 97.80 on Friday, before closing at 91.46. That's all on the same day. Too wild
for me, let me tell you. But, just in case it hits 97 or better on Monday or before the earnings are announced, we are calling for that to be a target sell price. Even tho the stock dropped steeply on Friday, we are still ahead based on the Big Dipper buy price--a lot less, but still ahead-at this point, that is.
Member Tip from Bernie---
You might mention CBS Market watch to the members.It's a free subscription and you can list any stocks you want. They send you immediate emails on news on your list of stocks. They sent me an email just before the close on an earnings report for "X". The stock shot up $2 after hours and I got out!
Today's Thought---
"The pessimist borrows trouble; the optimist lends encouragement."
.....William Arthur Ward
MIke Celeste
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