RE: [CANSLIM] Bear Rally?

From: "Hill, Ernie" <Ernie.Hill@ElPaso.com>
Subject: RE: [CANSLIM] Bear Rally?
Date: Mon, 15 Apr 2002 13:23:52 -0500

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Patrick,

You can be right about market direction and still lose money on options.
Because options are a depreciating asset and derive some of their value from
volatility, you need the market to move decisively in your direction to make
money, and if you are early on the turn even by a couple of days it is tough
to recover.

As for futures the leverage works both ways you need tight stops to protect
yourself if you are wrong, but the tight stops give you little room to
breathe, and I am not willing to take leveraged losses. 

I would rather trade good CANSLIM stocks and be happy with 10-20% returns
while the market is moving up. Also with good CANSLIM stocks I can keep my
losses to 5% or less.

While it is fun to try and peg exactly when the market will turn, this is
not what I depend on to make money. My method generates probabilities of
what the market will most likely do, I then wait for the market to confirm
that is has changed trend (although I do try to get in as early as
possible). Then I will take my long positions and ride the trend up.

E

- -----Original Message-----
From: Patrick Wahl [mailto:pjwahl@attbi.com] 
Sent: Sunday, April 14, 2002 10:50 PM
To: canslim@lists.xmission.com
Subject: RE: [CANSLIM] Bear Rally?

If you can actually call market turns like that, you better start buying
some S&P 
futures, or maybe options on the OEX,  you would do well if your forecasts
are 
accurate.  

This should be the week where the market finds some direction, since there
is going 
to be a good sampling of earnings to gauge how things are going, plus there
are 
frequently forward looking statements that come out with the earnings.  

Seasonally speaking, there are probably another 4 to 8 potentially good
weeks, then 
we get into a bit of a doldrum period, especially June, which shows very
poor 
returns on the limited backtesting I've done.

On 13 Apr 2002 at 20:56, Hill, Ernie wrote:

> Patrick,
> 
> I can only speak about the S&P 500 because that is the index I concentrate
> on because it represents the broad market and includes old economy stocks
as
> well as tech stocks.
> 
> My model suggests a strong probability of an intermediate term low being
> made next week in this index most likely on Tuesday or Wednesday. I expect
> the S&P to test the 1075 support level and close above the 1085 level on
the
> day it puts in the low.
> 
> This low should set the stage for a four to five week advance. If this
> up-swing in the market takes out the recent highs near 1175, which I
believe
> it will then the case for a new bull market remains intact. However, if it
> fails to take out the highs near 1175 then we may have already seen the
high
> in the market for this year.

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