Subj : Market Action To : All From : Paul Rogers Date : Fri Sep 23 2005 05:01 pm Content-type: text/plain I've been asked for an opinion about the judgement of another market commentator, who claims there are signs of an imminent breakdown of the market, and it's a good time to sell. I have a couple thoughts about that, so let me bring them public instead of private email. 1) It amounts to trying to predict the future, and nobody can do that reliably. We can make some judgements about the mood of investors in general and how human beings and the computers they programmed might be likely to respond with some success--if we recognize people are fickle creatures. But there are things we can reasonably predict, and things we can't. Nobody can predict natural disasters except in the most general terms. When Katrina was approaching Miami it was little more than a tropical storm. The oil pits were already panicking, but without justification. I have been suggesting all along that this summer's spike in energy prices has been mainly speculation--"Because we CAN." That said, people are finally beginning to take seriously the proposition that oil is a finite resource, we're using it faster than geological processes create it, population and dependence on heavy utilization of energy to support ourselves continues to increase. We can predict a train-wreck a-coming. I have also been consistently critical of the "minimum-cost, just in time" paradigm of American business. It is exceedingly fragile and what we need is robust. There is no room for error, or natural disaster in that scheme. That makes the markets more risky now than they used to be--and that's to say nothing of national security. Without intending to be unpatriotic, I also see parallels in America's role as a world economy with Britain's in the 19th century. China & India seem to be playing "America" to our "Britain". The continued changes in high-wage employment at home, offshoring, and the twin deficits, are enough to cause realistic concern. I believe successful investors are going to learn to adapt to new investing paradigms--it's not going to be the way we've come to expect it. So while I'm NOT predicting a top in the market, I have several times in this commentary pointed to the fact that we are not yet above the S&P's 1527 high, and are technically still in the Bear Market. What I am suggesting is that there are important trends that are going to influence the American economy, hence the markets. I've been suggesting all year we need to learn some more conservative, traditional investing strategies. 2) I think if you review my commentary, say, for the year it's fair to say my overall attitude has been skeptical. This summer "rally" has been little more than a move across a "horizontal channel" from a little below the bottom "support line" to a little above the top "resistance line". Investors, the Street, the market have NOT been bullish! They've just engineered a minor move they could make some money with, and preserve the (their?) reputation of Wall Street as a proper place to invest. The position right now is barely above where the year started, but the Oscillator is trending downward, and is now decidedly negative. That means the majority of NYSE stocks have been closing lower day after day, "Decliners" have lead "Advancers". How long that will continue is anybody's guess--see 1) above. Whether that's a signal to buy, or sell, or irrelevant, depends on one's particular strategies and tactics. No, really, it does! It does confirm the falling value of the S&P in the other 4,000 NYSE stocks. This is not a "head fake". I have also been insisting all along that we need to learn new tricks. I've consistently talked about "selling into strength", taking profits from minor rallies, rather than viewing them as the beginning legs of Bull Markets. Main Street too often waits for prices to rise before they get interested. When it takes a 10% rise to interest one, one is getting interested at the time a professional investor sees he can book a profit equal to the typical gain of the S&P for an entire year. That's a dangerous time to buy in! And you have yet to see me advocate the sort of bargain-hunting, "bottom-feeding", "buy 'em when they're down" tactics Main Street likes. That is not to say that a significant portion of my mutual funds isn't in "value" funds, it is. But I'm leaving that to the professionals with the means to judge whether a stock in the dumpster is merely unloved, or is on it's way to cratering. So, if you haven't gathered I think it's always a good time to lock-in your profits, sell half when you hit a 100% home-run and recoup your entire investment, then you haven't been paying attention. If one wants to sell now--it's always a good time. There is risk in the market! Now, as to today's market action, once again the morning was tough sledding, but when Rita was downgraded once again and the oil pits showed signs of relaxing, prices rose in the afternoon, only to give it back into the close. Closing prices were little changed and volume sank to just +1% above average. That's actually remarkable. The Day-Traders wouldn't want to be "holding" into the weekend. Perhaps some action over the past week was in part them running to cash out. Price Vola- Momen- Volume Oscil- Summ. Change tility tum lator Index -__+ -__+ -__+ -__+ -__+ -__+ _|__ _|__ __|_ __>_ _|__ __|_ 09/19 _|__ _|__ _|__ ___> <___ __|_ 09/20 _<__ _|__ _|__ ___> <___ __<_ 09/21 __<_ _|__ _|__ ___> <___ __<_ 09/22 __<_ _|__ _|__ __>_ <___ __<_ 09/23 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: 09/06/05 S&P: 1233 Winner or Loser: tbd By: tbd See my market tracking charts for '03-'04 and my investment strategy study at my website(s): http://www.xprt.net/~pgrogers/Pers.html http://www.geocities.com/paulgrogers/Pers.html Paul Rogers, paulgrogers@yahoo.com -o) http://www.angelfire.com/or/paulrogers /\\ Rogers' Second Law: Everything you do communicates. _\_V .... We learn from history that we do not learn from history. ___ MultiMail/MS-DOS v0.35 --- * Origin: The Bare Bones BBS (1:105/360) .