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Issue
00-00,
(Last Fearless
Fund & Index Trader sent: 0/00/00)
COMMENTARY:
Another day in
the history of the “long grind.” Yes, that will be the name of
this bear market in technology and telecom, once it’s over,
possibly in a year or two. The current phase is sometimes called a
“liquidation bear market”, because it is marked by continued
liquidation of such stocks, which were accumulated during the
prior bull market mania. Every rally is used as a selling
opportunity for those who want to get out, while there is
virtually a total absence of buyers for such stocks.
At the close today, the DJI had
lost another 58 points, closing at 9923.
The Nasdaq lost over 27, closing at 1624. Volume was very
light, but somewhat heavier than recent days. On a down-day,
that’s negative.
Even worse, on
the Nasdaq 82% of volume was to the downside. On a day where the
index loss was relatively small, that shows a big tilt to the sell
side. Technology was once again the weakest area.
According to Investors’ Intelligence newsletter, 53% of
investment advisors are currently bullish, while the percentage of
bears dropped again to the 28% area from above 30%. This means
that while the market has been declining, these guys are getting
more bullish. It is a very negative sign for the market. Bottoms
usually don’t occur until these people get very bearish on the
market.
Moody’s cut the
bond rating for AT&T to Baa2, the second-lowest investment
grade rating. This used to be the best credit risk in the country.
The credit crunch will worsen.
The dollar
plunged to a 14 month low vs. the Euro. Sentiment is now that the
U.S. economic recovery is slowing. That is negative for the U.S.
stock market….Goldman Sachs downgraded the gold mining sector
because of the strong run up. They don’t see gold prices
advancing much from current levels for the rest of the year. To
that I say that at current levels, most mining companies will have
a very good cash flow. Gold rose to a 4.5 year high today.
The tech and
telecom sectors don’t have much positive to look forward to.
Technically, these areas look very poor. The declines could
accelerate over the next two weeks. The Nasdaq Comp could get back
to the 1400 area, the crash low of last September. If you missed
it, take another look at these indices and the A/D lines on our
website: www.dohmencapital.com,
and go to the “Current Outlook” page.
Let's look at our
current positions:
CURRENT POSITIONS:
MUTUAL FUND
TRADERS:
New Subscribers: You may wish
to replicate the positions above.
PROFUNDS:
You would have 50% in the Bear Fund (BRPIX). Gained 0.23, closing at 39.59. I would hold.
You
would have 50% in cash. I would put that into the SHORT OTC FUND (SOPIX).
This fund replicates a short position in the NASDAQ 100 index. It
is not leveraged.
New Subscribers: You may wish
to replicate the positions above.
INDEX TRUST
TRADERS:
You would be 50% SHORT in the BIOTECH HOLDRS TRUST (BBH)—Declined
2.50, closing at 97.20. Had a high of 101.14 before declining to
close on the lows. OK for new positions.
You
would be 50% SHORT in the SOFTWARE HOLDRS TRUST (SWH)—Declined
0.55, closing at 30.90. Volume was heavy again.
OK for new positions.
New Subscribers: You may wish to replicate the positions above.
CONCLUSION:
The major trend in the indices
is down. The strong areas have lost momentum. Even the gold mining
sector started correcting today, although the metal was up and the
dollar was down. Therefore, this might just be another buying
opportunity in that area.
The bond market is strong,
which is bad for stocks, as it shows that money is flowing out of
stocks into bonds. It appears that money is fleeing to safety.
That does not bode well for the near future.
Best regards,
Bert
Dohmen
_____________________________________________________________________________________________________
WHAT
“AREA” MEANS IN FEARLESS FUND:
When
I give advice to buy or sell in certain price area, I do it so
that not all of our orders are sitting at exactly the same price.
By “area”, I mean a range.
Our rules of thumb are as follows:
[<
than $15] = ±
0.25;
[< than $30]
= ±
0.50;
[< than $50] = ±
0.75;
[< than $100]
= ±
$1.00;
[> than $100 ±
$1.50.
Note:
Bert Dohmen’s Fearless Fund & Index Trader is
copyrighted, with all rights reserved, and for personal use of the
subscriber only. Financial
planners or investment professionals who wish to use the service
for their clients’ portfolios should inquire about a site
license or multiple subscription discounts.
All commentary is provided for educational purposes only.
Information contained in this service is NOT a solicitation
to buy any security. This
material is based upon information we consider reliable. However,
we do not represent that it is accurate or complete, and that it
should be relied upon.
Dohmen
Capital Research Institute, Inc. or any of its affiliates, cannot
be held liable for Fearless Fund & Index Trader transmissions
that are not received
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