Subj : Market Action To : All From : Paul Rogers Date : Wed Dec 03 2003 06:21 pm

"A Tale of Two Markets".  Today's NYSE chart looks like Monument Valley.
It jumped straight up in the morning, plateaued there, and then jumped
back down in mid afternoon.  The NASDAQ/OTC tried to follow, but as soon
as that led it above 2,000, it panicked and ran screaming back--then in
mid-afternoon it jumped off a cliff.

I've often maintained investing is half fundamentals, half psychology.
I think investors probably agree that the hardest sequence is to have
bought a stock at the wrong time, seen it fall without applying the 7%
Solution, doggedly hold on until it recovers, finally sell out somewhere
near cost, and then see it subsequently make the move we expected when
we bought it.  If that hasn't happened to you, you haven't been
investing in stocks much.

It's a tough situation to live through.  Let me suggest the way to look
at the situation is we paid our dues for a poor tactical decision when
we bought, and failing to acknowledge our mistake by promptly applying
the 7% Solution.  Also, a stock that fell like that is really more
likely to fall in the future than sky-rocket.  It's the ones that do
that we remember.  As I said a few days ago, we really should accept the
issue here is how we made the purchase decision and why we didn't
protect ourselves, not why we sold out too soon to take advantage of the
profits we wanted.  If we'd sold when it dropped 7% below our purchase
price, we'd still have had most of our money to reinvest if it was
really that good an idea.

As I recall in both 2001 and 2002 the market gurus were telling us,
"sure the first half has been bad, but just wait for the second half."
What we weren't willing to admit is that we were really in a Bear
Market.  Now, that's good news for Dollar Cost Averagers, bad news for
"active investors"--OK, the word is "Momentum Players".  In a Bear
Market, most stocks don't "follow" the market averages down, the market
averages go down because the stocks are falling.  How is it we expected
to make money in that environment using a Momentum strategy?
Something's wrong with our tactics here!

I still don't see a Bull Market yet.  This still isn't the time to be
trying to apply a Momentum strategy.  My suggestion for the past year or
so is our buying should have been aimed at carefully upgrading the
quality of our portfolios with "blue chip" and "best of breed" sorts of
stocks for long term apreciation and stability.  That's called Value
Investing.  That's what you do at market bottoms.

Price     Vola-     Momen-    Volume    Oscil-    Summ.
Change    tility    tum                 lator     Index
 -__+      -__+      -__+      -__+      -__+      -__+

 __>_      <___      __|_      _|__      __>_      ___<     11/26
 _>__      |___      __|_      <___      __>_      ___<     11/28
 __>_      >___      __|_      __<_      __>_      ___|     12/01
 _>__      >___      __|_      __<_      __>_      ___|     12/02
 _|__      >___      __|_      __<_      __|_      ___>     12/03

Timing Signals:  I don't use or recommend timing signals, but they're
fun to watch.  If I did though, well, I might use something like this.
(Be warned!!  It tends to whipsaw around signal points!)

Last Signal: BUY        Date:  11/24/03 S&P:    1052
Winner or Loser:  tbd                   By:     tbd

See my market tracking charts for '01-'02 and my investment strategy
study at my website(s):
http://www.xprt.net/~pgrogers/Pers.html
http://www.angelfire.com/or/paulrogers/Pers.html
http://www.geocities.com/paulgrogers/Pers.html
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