March 01, 2002  

How to trade and make money in the stock market. Stocktracker has the stock trading software and the strategy to make trading profitable and simple.

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McClellan Oscillator for Week Ending March 01 , 2002 

Monday        Feb 12     +40.86      Up  49.19

Tuesday       Feb 19    +65.46       UP  24.60 

Wednesday Feb 27    +75.46       UP  10.00

Thursday      Feb 28    +71.61   Down  3.85

Friday           Mar 01   +122.32     UP  50.71

The McClellan Oscillator is telling us that the market is in overbought territory. The market is advancing on weak volume and has recorded four declining peaks.

The Dow Jones Industrials and the Dow Transports closed above their January highs. The Dow is now above its 50 day moving average and its 200 day moving average, and the psychological level of 10,000.

Lowery's buying power index continues to indicate weakness despite the advance in the Dow Jones Industrials. There has been substantially more downside volume over the last month on a cumulative basis on the NYSE. Upside volume is closer to the February low than the January high. Gains have therefore been made on relatively low volumes and that is where the sign of weakness comes from. This suggests that conditions do not favor a sustainable rally. With the short interest currently very high I expect short covering to create some excitement and some opportunity for those who know how to manage risk on the short side on the market.

Trading 

I have come to the conclusion that the collective mind of the market is easiest to read when there is a lot of emotional energy involved. Unfortunately it is so easy to read at points of extreme that it influences buy / sell decisions en masse. This convinces me that at these moments trading decisions are based on emotions that cause bad decisions to be made. 

To expand on that a bit - In my comments of August 31 2001 I noted that there was a lot of panic in the market that would probably cause the McClellan Oscillator to fall to -150 to -200 the following week. In my comments of September 7th I said I expected the panic sell off to continue the following week, culminating in a climactic sell off that would signal a market bottom, and a rally of at least 30% Click here for August 31 and here for September 7th.

The fear in the market was easy to read, and with so many people acting on that reading, oversold conditions resulted. Investors read the collective mind of the market but took the wrong action. They were motivated to act because the physic energy was so high. The correct action was the hard one to take because it meant acting in a counter intuitive way when the intuitive motivation was very high.

I also spoke of how hard it would be to act in a counter intuitive way early in 2002 when analysts and Wall Street guru's would be touting the rebirth of the bull market.

With the FED ramping up the money supply, low interest rates, strong housing prices and a bullish consumer, the re-inflating of the bubble is a possibility. On the Home page I mention the potential of one index to make a final assault on a new high. That potential still exists and, if it is to happen, it will happen on relatively low volume in the overall NYSE stocks.

A new high in the Dow Jones Industrials will more than likely present one of the greatest shorting opportunities in the history of the stock market. It will also call for exceedingly difficult counter intuitive action. Investors getting getting very little interest on their money are speculating in overvalued equities. A weakening dollar, consumer debt and bump in the housing market could be the trigger for a return to prices that will represent good values.

The events of September 11 came at a time when the markets were likely to have seen a low point as a result of a climactic sell off. The new dimension of physic energy mixed with feelings of patriotism and anger allowed for the low to take place on September 21 without any climactic sell off. The markets have rallied more than 40% off those lows. I missed the rally, waiting for that sell off that has not yet happened. 

Earnings next week

Reporting next week will be the following:- Staples, Ann Taylor Stores, National Semiconductor, PG&E, Saks and Krispy Kreme. Overall it will be a very light earnings calendar. On the economic front reports on consumer credit and factory orders for January are expected on Thursday.

Our Outlook

This is a very dangerous market for the average investor who is not well tutored in money management as it applies to the stock market. The management of risk is what our software and our method of trading deals with. 

Anyone can use our trading signals and our software to manage risk and be aggressive to the point of making extraordinary gains. That is not what we recommend but it is possible, and easier to do with our software than with any other stock market management tool that I have come across. 

I get so much unsolicited mail from people pushing trading alerts and making outrageous claims. If they do make the profits I can guarantee that the levels of risk being taken are also outrageous. I do not believe any of them and I suggest you ignore them also. I put them in the same category I would place a racetrack tout.

Currently we track the trading ranges of over 300 companies online. Signals are given dynamically whenever a stock touches either extreme. Thirty three of those stocks are currently below September 21 lows. 

We are currently on the long side of many that are bouncing off those lows. There are still over 280 who may make the trip in coming months. I will mention the number each week so that you may pick up any developing trend. 

Before making any commitment to a trade, the feedback from trading volumes and other technical and fundamental data are checked, and adjustments made where necessary. The adjustments will either be to the commitment price or the volatility, if a commitment is already in place.

I have placed a links button on the Home page that will refer you to some of the very best software programs that I have been using in many cases for years. You may find some of them of interest to you.

For the period January 1, to March 1, the stocktracker portfolio is up 5.32% 

Exposure to the stock market represents 76.94% of equity. Cash represents 19.55% of equity. 

Short positions represent 53.48% of total exposure and long positions represent 46.52% This represents a 2.27% increase in exposure on the short side.

82.6% of long positions are profitable and 18% of short positions are profitable.

Regards,

Colin