Go to Jeff Salisbury LWGate Home Page.From: Eric Jaenike <ericjaenike@yahoo.com>
Subject: [CANSLIM] OT 1
Date: Tue, 29 Oct 2002 09:14:43 -0800 (PST)
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- --0-1810986784-1035911683=:86031 Content-Type: text/plain; charset=us-ascii Eric Jaenike <ericjaenike@yahoo.com> wrote:Date: Tue, 15 Oct 2002 15:14:37 -0700 (PDT) Well, it looks like our debutante woke up to a prince, and not a frog, as the rally has continued unabated. My concern, however, is that she will end up at the Mayo Clinic with a nasty case of herpes. There is really only one question that we need to answer right now: is this a sustainable bull rally, or is it a huge oversold bounce? Before I delve into this question, let me say that I would much rather have this be a bull run than a bounce. The bear side is much more difficult to play than the bull side: the countertrend moves are much more violent and difficult to time, people are generally pessimistic, profit potential is generally more limited, and it is far more stressful to operate in, even when you're making money. Frankly, its getting a little old. However, my own personal preference should play no roll in the analysis of where we are, or what the proper moves to make are. So back to our original question: is this move for real or not? Fortunately, we have our discipline to fall back on, so let's fall back on it. As you may recall, there are two main parts to this analysis: the price/volume action in the general indices, and the price volume action in individual stocks. Let's start with the indices. On Thursday, the day of the first big ramp, we rallied off a very oversold condition on what could be construed as positive news. Friday saw similar action, with GE's non-miss, the IBM upgrade, and inline retail sales numbers (recall that in a negative environment, meeting expectations is often akin to "good news", even if those expectations had previously been significantly ratcheted down). Volume, however, was notable lighter on the NYSE. In sum, we had two positve news days, with the second up day coming on suspicious volume. Recall that positive news rallies are dangerous and very susceptible to reversal. Monday the indices were up slightly, on light volume, as the Columbus Day holiday killed trading volume. Tough to call it a negative day, because volume was pretty much guaranteed to be lighter. Today, we saw a massive ramp job, with volume notably not building from Thursday and Friday's levels. This is disconcerting, and not a sign of strength. Another yellow flag. Futhermore, today's up day came on a slew of positive news: C beat by a penny, BAC by 4 cents, MO got upgraded, JNJ did well, and Philips electronics said it expected to post a profit. So today, we saw a massive up day, on positive news, with questionable volume. Looking at individual stocks, we have a disconcerting picture. Without going into great detail, there is not a lot of leadership and setups that would be supportive of a sustained bull run. There is some sector strength- see education, hmo's, insurance brokers, some medical stocks (CTMI, FRX, etc), hospitals, some retail, and some isolated (i.e. not sector supported) strength in individual names(ex. ZMH, JCOM, CCCG, RINO, etc). Today, there were a number of notable reversals in recent breakouts, which I was surprised to see (see PDCO, EDMC, MME, etc). This is not a good sign, especially on such a powerful up day. Furthermore, the recent run appears to have been on the back of former beaten down stocks, such as MER, JPM, INTC, IBM, etc. IBM, for example, has jumped from 54 to 68 in 4 days, for a 27% gain. This activity can be seen in one proprietary (but not mine) model that tracks the performance of the most heavily shorted, lowest rated stocks. As of this afternoon, these stocks had outperformed by 90 basis points, indicating short squeeze buying. Short squeeze stocks are not the stocks that will lead a sustained bull run, but will lead a short term bounce. Finally, remember that the fundamentals have not improved recently, and, in fact, have worsened. All in all, a dangerous time to get long, in my opinion. The next few days should go far in telling us whether this rally has solid legs. Eric PS INTC just missed after hours. Its trading down $2, along with much of tech. Tomorrow's activity should be interesting. We've come a long way off the recent low, and a lot has gotten priced into stocks in the past 4 days. There is a big difference between missing at new lows, and missing at new highs. Lets see how well the market can digest this. - --------------------------------- Do you Yahoo!? Faith Hill - Exclusive Performances, Videos, & more faith.yahoo.com - --------------------------------- Do you Yahoo!? Faith Hill - Exclusive Performances, Videos, & more faith.yahoo.com - --------------------------------- Do you Yahoo!? HotJobs - Search new jobs daily now - --0-1810986784-1035911683=:86031 Content-Type: text/html; charset=us-ascii <P> <P> <B><I>Eric Jaenike <ericjaenike@yahoo.com></I></B> wrote: <BLOCKQUOTE style="PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #1010ff 2px solid">Date: Tue, 15 Oct 2002 15:14:37 -0700 (PDT)<BR><BR><BR> <P>Well, it looks like our debutante woke up to a prince, and not a frog, as the rally has continued unabated. My concern, however, is that she will end up at the Mayo Clinic with a nasty case of herpes. <BLOCKQUOTE style="PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #1010ff 2px solid"> <P>There is really only one question that we need to answer right now: is this a sustainable bull rally, or is it a huge oversold bounce? Before I delve into this question, let me say that I would much rather have this be a bull run than a bounce. The bear side is much more difficult to play than the bull side: the countertrend moves are much more violent and difficult to time, people are generally pessimistic, profit potential is generally more limited, and it is far more stressful to operate in, even when you're making money. Frankly, its getting a little old. However, my own personal preference should play no roll in the analysis of where we are, or what the proper moves to make are.</P> <P>So back to our original question: is this move for real or not? Fortunately, we have our discipline to fall back on, so let's fall back on it.</P> <P>As you may recall, there are two main parts to this analysis: the price/volume action in the general indices, and the price volume action in individual stocks. Let's start with the indices.</P> <P>On Thursday, the day of the first big ramp, we rallied off a very oversold condition on what could be construed as positive news. Friday saw similar action, with GE's non-miss, the IBM upgrade, and inline retail sales numbers (recall that in a negative environment, meeting expectations is often akin to "good news", even if those expectations had previously been significantly ratcheted down). Volume, however, was notable lighter on the NYSE. In sum, we had two positve news days, with the second up day coming on suspicious volume. Recall that positive news rallies are dangerous and very susceptible to reversal.</P> <P>Monday the indices were up slightly, on light volume, as the Columbus Day holiday killed trading volume. Tough to call it a negative day, because volume was pretty much guaranteed to be lighter. Today, we saw a massive ramp job, with volume notably not building from Thursday and Friday's levels. This is disconcerting, and not a sign of strength. Another yellow flag. Futhermore, today's up day came on a slew of positive news: C beat by a penny, BAC by 4 cents, MO got upgraded, JNJ did well, and Philips electronics said it expected to post a profit. So today, we saw a massive up day, on positive news, with questionable volume. </P> <P>Looking at individual stocks, we have a disconcerting picture. Without going into great detail, there is not a lot of leadership and setups that would be supportive of a sustained bull run. There is some sector strength- see education, hmo's, insurance brokers, some medical stocks (CTMI, FRX, etc), hospitals, some retail, and some isolated (i.e. not sector supported) strength in individual names(ex. ZMH, JCOM, CCCG, RINO, etc). Today, there were a number of notable reversals in recent breakouts, which I was surprised to see (see PDCO, EDMC, MME, etc). This is not a good sign, especially on such a powerful up day.</P> <P>Furthermore, the recent run appears to have been on the back of former beaten down stocks, such as MER, JPM, INTC, IBM, etc. IBM, for example, has jumped from 54 to 68 in 4 days, for a 27% gain. This activity can be seen in one proprietary (but not mine) model that tracks the performance of the most heavily shorted, lowest rated stocks. As of this afternoon, these stocks had outperformed by 90 basis points, indicating short squeeze buying. Short squeeze stocks are not the stocks that will lead a sustained bull run, but will lead a short term bounce.</P> <P>Finally, remember that the fundamentals have not improved recently, and, in fact, have worsened.</P> <P>All in all, a dangerous time to get long, in my opinion. The next few days should go far in telling us whether this rally has solid legs.</P> <P>Eric</P> <P>PS INTC just missed after hours. Its trading down $2, along with much of tech. Tomorrow's activity should be interesting. We've come a long way off the recent low, and a lot has gotten priced into stocks in the past 4 days. There is a big difference between missing at new lows, and missing at new highs. Lets see how well the market can digest this.</P> <P> </P> <P><BR> <HR SIZE=1> Do you Yahoo!?<BR><A href="http://faith.yahoo.com/">Faith Hill</A> - Exclusive Performances, Videos, & more<BR><A href="http://faith.yahoo.com/">faith.yahoo.com</A></BLOCKQUOTE> <P><BR> <HR SIZE=1> Do you Yahoo!?<BR><A href="http://faith.yahoo.com/">Faith Hill</A> - Exclusive Performances, Videos, & more<BR><A href="http://faith.yahoo.com/">faith.yahoo.com</A></BLOCKQUOTE><p><br><hr size=1>Do you Yahoo!?<br> <a href="http://rd.yahoo.com/careers/mailsig/*http://www.hotjobs.com ">HotJobs</a> - Search new jobs daily now - --0-1810986784-1035911683=:86031-- - - - -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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