Go to Jeff Salisbury LWGate Home Page.From: "Katherine Malm" <kmalm@earthlink.net>
Subject: Re: [CANSLIM] Lack of Buy Candidates
Date: Sun, 17 Feb 2002 09:16:10 -0600
Previous Article (by Date): AW: [CANSLIM] Industry group movements. Andreas Himmelreich
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Hi jans,
I wouldn't say that the market direction isn't important. I'd state it a =
bit differently---I will not simply "stay out" because the collective =
index is behaving a certain way. If you'll bear with me, I'll try and =
give a reasoned answer as to why.
The market is a market of stocks, not a "stock market." If you are =
trading an index, then the condition of the stock market index is =
meaningful because you are trading "all stocks in the index." Example, =
trading the SPY's the QQQ's, an index fund that tracks the market, etc. =
You are then trading the "collective whole." But if I take out my =
Sherlock Holmes spy glass, I see that under the surface, there are many =
stocks doing different things. These represent many companies in many =
markets with many products who serve varied economic needs. To say that =
"all stocks move the same direction" is to assume that all products, =
markets, economically sensitive groups move in exactly the same way at =
exactly the same time. They do not. What *does* tend to move in tandem =
is human emotion. If people "believe" that equities are a good =
investment, they will vote with their dollars. If they "believe" that =
investing in something else is better, they will move their money out of =
the equity markets. So, we have 2 things working against each other. =
But....if you are an investor in individual equities, you know that, =
despite human emotion, the US markets have *huge* amounts of money that =
have to stay invested one way or another....guess what.....these are =
institutional monies like pension funds, mutual funds from 401K plans, =
insurance company monies, etc.
Conclusion? There will always be *some* money moving around in the =
equity markets. If I choose to put my money there, then I know that =
there will be some stocks going up and some stocks going down. In some =
ways, that means that the "index" of all stocks has far less meaning to =
me than the strength of an individual stock because the "index" hides =
underlying strength. Now I have to be able to spot the good stocks. =
Human emotion and economic/business factors still play a role here, so =
using industry movement *and* stock movement together gives me some =
markers to help direct my attention. In CANSLIM, I know there are some =
underlying assumptions and so I can make some conclusions based on =
those:
- --CANSLIM is not a bottom fishing strategy, therefore, find strength and =
buy into strength
- --CANSLIM is not a "get on the band wagon first" strategy, therefore, =
find upward movement early in the move and *follow* it up
These kinds of strategies are particularly important if monies are in =
non-marginable accounts that can't be shorted. In marginable accounts, =
the other way to play a choppy, sideways or declining "market" is to =
turn CANSLIM upside down and find stocks breaking down in industries =
breaking down and short them. But, either way, the strategy is the same. =
Once the market trends strongly one direction or another, it just means =
those positions found early in a move can be ridden *longer.* For =
example, stocks I rode long in late '98-'99 I got to ride for a very =
long time, stocks I shorted in early 2000 I got to ride for many weeks. =
As the bear wore on, the long and short rides became of shorter and =
shorter duration. I think of it as shaking out a table cloth. The first =
couple of shakes get most of the debris out, but then you have to shake =
it like the dickens in shorter and shorter motions to get those tiny =
crumbs to let loose. Once the table cloth is clean, you can put it back =
on the table and start a new meal.
Katherine
----- Original Message -----=20
From: Spencer48@aol.com=20
To: canslim@lists.xmission.com=20
Sent: Saturday, February 16, 2002 10:49 PM
Subject: Re: [CANSLIM] Lack of Buy Candidates
Katherine:
Apropos of your E-mail, then, are you stating that the Market's=20
direction isn't as important as WON says it is. He says that about =
70% of=20
stocks will fall, no matter how great their earnings are, during a =
bear=20
market. That's why he advises not to go long during a bear.
I've been taking this advice. Anecdotally, based on my =
experience in=20
the market, his advice regarding the Market's direction and when and =
when not=20
to buy stocks always seemed valid. However, as I understand it, you =
are=20
saying that strong stocks (stocks with high and accelerating earnings) =
in=20
strong industries will do well-even during a bear. And how do you =
define a=20
"strong industry"? The top 40% of IBD's 197?
I wonder if WON has ever done a statistical study on the 70% =
failure=20
rate of strong stocks WHEN the strong stock is in a strong industry? =
It=20
would be very interesting to see if the 70% falls, and by how much it =
falls. =20
It would be even more eye-opening if he were able to statistically =
correlate=20
the strength of the industry (during a bear) with the likelihood that =
the=20
stock would rise or fall.
jans
In a message dated 2/16/2002 10:57:52 AM Eastern Standard Time,=20
kmalm@earthlink.net writes:
<< I don't buy the CANSLIM party line that you should "stay out" of =
the=20
market if there aren't 1000's of stocks to choose from. I look for =
good=20
stocks with rising relative strength, strategic advantage and good =
technical=20
strength that are members of rising and strong industry groups. I sell =
stocks=20
that break down technically or that are members of a group that is =
beginning=20
to break down. I short stocks/groups in industries that are breaking =
down to=20
take advantage of the prevailing winds. I let the market tell me which =
kinds=20
of stocks are doing well. Whether it's value/growth, small/mid/large =
cap,=20
industry group, I'm agnostic (except that I *do* stay away from super=20
microcaps). What works, works and I have a methodology that looks for =
what's=20
working.
=20
The "market" is nothing more than a market of stocks. Too many people =
focus=20
on what's *not* working and miss the many great opportunities that are =
out=20
there. One of my mentors always says "when the market speaks, have big =
ears."=20
I say, "when a stock and an industry speaks, have big ears." As I see =
it, too=20
many folks are still focused on what *was* working during the last =
Great Bull=20
market. This is the history of markets... >>
-
-To subscribe/unsubscribe, email "majordomo@xmission.com"
-In the email body, write "subscribe canslim" or
-"unsubscribe canslim". Do not use quotes in your email.
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<HTML><HEAD>
<META http-equiv=3DContent-Type content=3D"text/html; =
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<BODY bgColor=3D#ffffff>
<DIV>Hi jans,</DIV>
<DIV> </DIV>
<DIV>I wouldn't say that the market direction isn't important. I'd state =
it a=20
bit differently---I will not simply "stay out" because the collective =
index is=20
behaving a certain way. If you'll bear with me, I'll try and give a =
reasoned=20
answer as to why.</DIV>
<DIV> </DIV>
<DIV>The market is a market of stocks, not a "stock market." If you are =
trading=20
an index, then the condition of the stock market index is meaningful =
because you=20
are trading "all stocks in the index." Example, trading the SPY's the =
QQQ's, an=20
index fund that tracks the market, etc. You are then trading the =
"collective=20
whole." But if I take out my Sherlock Holmes spy glass, I see that under =
the=20
surface, there are many stocks doing different things. These represent =
many=20
companies in many markets with many products who serve varied economic =
needs. To=20
say that "all stocks move the same direction" is to assume that all =
products,=20
markets, economically sensitive groups move in exactly the same way at =
exactly=20
the same time. They do not. What *does* tend to move in tandem is human =
emotion.=20
If people "believe" that equities are a good investment, they will vote =
with=20
their dollars. If they "believe" that investing in something else is =
better,=20
they will move their money out of the equity markets. So, we have 2 =
things=20
working against each other. But....if you are an investor in individual=20
equities, you know that, despite human emotion, the US markets have =
*huge*=20
amounts of money that have to stay invested one way or another....guess=20
what.....these are institutional monies like pension funds, mutual funds =
from=20
401K plans, insurance company monies, etc.</DIV>
<DIV> </DIV>
<DIV>Conclusion? There will always be *some* money moving around in the =
equity=20
markets. If I choose to put my money there, then I know that there will =
be some=20
stocks going up and some stocks going down. In some ways, that means =
that the=20
"index" of all stocks has far less meaning to me than the strength of an =
individual stock because the "index" hides underlying strength. Now I =
have to be=20
able to spot the good stocks. Human emotion and economic/business =
factors still=20
play a role here, so using industry movement *and* stock movement =
together gives=20
me some markers to help direct my attention. In CANSLIM, I know there =
are some=20
underlying assumptions and so I can make some conclusions based on =
those:</DIV>
<DIV> </DIV>
<DIV>--CANSLIM is not a bottom fishing strategy, therefore, find =
strength and=20
buy into strength</DIV>
<DIV>--CANSLIM is not a "get on the band wagon first" strategy, =
therefore, find=20
upward movement early in the move and *follow* it up</DIV>
<DIV> </DIV>
<DIV>These kinds of strategies are particularly important if monies are =
in=20
non-marginable accounts that can't be shorted. In marginable accounts, =
the other=20
way to play a choppy, sideways or declining "market" is to turn CANSLIM =
upside=20
down and find stocks breaking down in industries breaking down and short =
them.=20
But, either way, the strategy is the same. Once the market trends =
strongly one=20
direction or another, it just means those positions found early in a =
move can be=20
ridden *longer.* For example, stocks I rode long in late '98-'99 I got =
to ride=20
for a very long time, stocks I shorted in early 2000 I got to ride for =
many=20
weeks. As the bear wore on, the long and short rides became of shorter =
and=20
shorter duration. I think of it as shaking out a table cloth. The first =
couple=20
of shakes get most of the debris out, but then you have to shake it like =
the=20
dickens in shorter and shorter motions to get those tiny crumbs to let =
loose.=20
Once the table cloth is clean, you can put it back on the table and =
start a new=20
meal.</DIV>
<DIV> </DIV>
<DIV>Katherine</DIV>
<BLOCKQUOTE=20
style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; =
BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV style=3D"FONT: 10pt arial">----- Original Message ----- </DIV>
<DIV=20
style=3D"BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: =
black"><B>From:</B>=20
<A title=3DSpencer48@aol.com=20
href=3D"mailto:Spencer48@aol.com">Spencer48@aol.com</A> </DIV>
<DIV style=3D"FONT: 10pt arial"><B>To:</B> <A =
title=3Dcanslim@lists.xmission.com=20
=
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Saturday, February 16, =
2002 10:49=20
PM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> Re: [CANSLIM] Lack of =
Buy=20
Candidates</DIV>
<DIV><BR></DIV>Katherine:<BR><BR> Apropos of =
your=20
E-mail, then, are you stating that the Market's <BR>direction isn't as =
important as WON says it is. He says that about 70% of =
<BR>stocks will=20
fall, no matter how great their earnings are, during a bear =
<BR>market. =20
That's why he advises not to go long during a=20
bear.<BR><BR> I've been taking this =
advice. =20
Anecdotally, based on my experience in <BR>the market, his advice =
regarding=20
the Market's direction and when and when not <BR>to buy stocks always =
seemed=20
valid. However, as I understand it, you are <BR>saying that =
strong=20
stocks (stocks with high and accelerating earnings) in <BR>strong =
industries=20
will do well-even during a bear. And how do you define a =
<BR>"strong=20
industry"? The top 40% of IBD's =
197?<BR><BR> I=20
wonder if WON has ever done a statistical study on the 70% failure =
<BR>rate of=20
strong stocks WHEN the strong stock is in a strong industry? It=20
<BR>would be very interesting to see if the 70% falls, and by how much =
it=20
falls. <BR>It would be even more eye-opening if he were able to=20
statistically correlate <BR>the strength of the industry (during a =
bear) with=20
the likelihood that the <BR>stock would rise or=20
fall.<BR><BR>jans<BR><BR><BR>In a message dated 2/16/2002 10:57:52 AM =
Eastern=20
Standard Time, <BR><A=20
href=3D"mailto:kmalm@earthlink.net">kmalm@earthlink.net</A>=20
writes:<BR><BR><< I don't buy the CANSLIM party line that you =
should=20
"stay out" of the <BR>market if there aren't 1000's of stocks to =
choose from.=20
I look for good <BR>stocks with rising relative strength, strategic =
advantage=20
and good technical <BR>strength that are members of rising and strong =
industry=20
groups. I sell stocks <BR>that break down technically or that are =
members of a=20
group that is beginning <BR>to break down. I short stocks/groups in =
industries=20
that are breaking down to <BR>take advantage of the prevailing winds. =
I let=20
the market tell me which kinds <BR>of stocks are doing well. Whether =
it's=20
value/growth, small/mid/large cap, <BR>industry group, I'm agnostic =
(except=20
that I *do* stay away from super <BR>microcaps). What works, works and =
I have=20
a methodology that looks for what's =
<BR>working.<BR> <BR> The=20
"market" is nothing more than a market of stocks. Too many people =
focus <BR>on=20
what's *not* working and miss the many great opportunities that are =
out=20
<BR>there. One of my mentors always says "when the market speaks, have =
big=20
ears." <BR>I say, "when a stock and an industry speaks, have big =
ears." As I=20
see it, too <BR>many folks are still focused on what *was* working =
during the=20
last Great Bull <BR>market. This is the history of markets... =20
>><BR><BR>-<BR>-To subscribe/unsubscribe, email "<A=20
=
href=3D"mailto:majordomo@xmission.com">majordomo@xmission.com</A>"<BR>-In=
the=20
email body, write "subscribe canslim" or<BR>-"unsubscribe =
canslim". Do=20
not use quotes in your email.<BR></BLOCKQUOTE></BODY></HTML>
- ------=_NextPart_000_0038_01C1B793.BD5ABB00--
- -
- -To subscribe/unsubscribe, email "majordomo@xmission.com"
- -In the email body, write "subscribe canslim" or
- -"unsubscribe canslim". Do not use quotes in your email.
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