Swan Song
nothing much has
changed over the past three
weeks.
except about 10% on the naz.
and more signs that the economy is
moving toward recession.
not economic signs, mind you.
market signs — the only signs that
matter.
specifically, the retail index (the
rlx) completed the head-and-shoulders top that i had alluded to some weeks ago.
what was clear when i first mentioned
it on jan. 8 has become
even more so with each ensuing week.
i.e., that the semis have emerged as the leaders inside tech.
(the leaders of what? you ask.)
they are the leaders because they are
bouncing back more rapidly than any other tech segment.
remember, after a comedown it boils
down to the ones that bounce back and the ones that just lay there.
the tennis balls and the eggs.
you want the tennis balls.
ignore the eggs.
the semi equips continue to have the
better tone versus the semi producers themselves.
nothing has changed there.
the names are also pretty much the
same: on jan. 8 i mentioned novellus, kla, and teradyne as the chief
outperformers among semis and semi equips…though teradyne has merely performed in
line with the market, nvls and klac have continued to show some of the
best tape in tech…add brooks automation and lam to that list.
among the semis themselves, amd and
micron show the best tape, by factors.
study these charts.
though they are still burdened by beaucoup
resistance, they are a preview of the way things
will eventually look in the growth sector as tech stages a 3.5-steps-forward-3-steps-back
recovery.
just don’t labor under the notion that
everything will come back.
it won’t.
in case you were wondering, there is a
fundamental catalyst for the better action in the semi equips versus the semis
or the rest of tech.
there are three semi industry
standards that are in the process of changing.
one has to do with a switch in the
conductive material used and another has to do with cramming more on a smaller
physical surface.
the throes of the inventory correction
notwithstanding, semi producers must invest in new equipment to address these
new standards, to remain competitive with rivals.
if they don’t, they’ll fall behind the
curve, as the japanese producers did ten yrs. ago, and as the koreans did over
the past two yrs.
granted, these fundamentals have
precious little to do with medium-term trading, but, as i said, this is just in case you were
wondering.
meanwhile, the drillers, the lone
segment sporting classic bases over the past month, one by one failed after breakout.
marine drilling, ensco, noble
drilling, parker, patterson, were some of these.
in the bells, dell and
applied materials are the best actors, using the term quite loosely.
calpine
(
cpn |
Quote |
Chart |
News |
PowerRating) is
narrowing in on the top of a six-month base, its rs line having forged new-high
ground four weeks ago.
metro one
(
mton |
Quote |
Chart |
News |
PowerRating)
acts exceedingly well as it closes in on the top of its eight-week base.
the paucity of stocks
setting up like cpn and mton tells you the climate for the intermediate-term
operator remains soggy.
one thing to keep in mind is that
declines like the nasdaq’s, which can only be compared with the ’29-’32 drop (dow -89%,
s&p -86%) and the ’73-’74 drop (dow -45 %, s&p -48 %, naz -60%),
happen once a generation, at least up to this point.
just enough to etch a permanent mark
on the mindset of all market players — those who got burned, as well as those
who didn’t.
if you have been scathed by the
current experience, hopefully you have learned lessons which will last a
lifetime: what to do, what not to do.
due to the growing demands of my investment advisory business, I
am no longer able to do this column the justice that it so richly deserves.
ergo, this will be my final column for tradingmarkets.
i have enjoyed being here, and wish to thank none other than
that mythical man from malibu, jeff cooper, for making it possible.
jeff was also the person who
made it possible for sir gregory
kuhn to come aboard.
having sir greg, whom i’ve known for five years, on board was
a great complement to this space.
he is the embodiment of
“vivre heureux, vivre caché.”
i saw tradingmarkets as an opportunity to teach people how
to fish — as opposed to giving them a fish — something that wasn’t, and isn’t,
being done
as much as it should.
because when i started
trading in ’86, i had no one to turn
to.
it was like a dark hole.
no friends that traded or family members that traded or
neighbors that traded or anyone else that traded to learn from or bounce ideas
off of.
the net?
a lightly-used network of
academics and government types.
back then, charts themselves,
though in existence for over a hundred years, were anything but de rigueur.
charting software? say what??
in ’86, my ibm pc, with its 8086 chip, 640K of ram, two floppies,
and no hard drive could barely crank out a letter, let alone charts.
back then, each night i had to plot by hand on graph paper the dow, ny
volume, a-d line, new highs/lows.
and then when i finally
obtained an early charting program, i learned that my computer would be tied up for 120 nonstop
hours while it downloaded six years of historical data for 8,000 stocks.
and so, with my computer
tied up, i went camping in
the redwoods for four days, only to return to my computer to find it still
downloading historical data.
lucky for me that bill o’neil appeared on tv twice a week back
in ’90-’92.
being exposed to the living legend
that he is during that period of time was the single
biggest thing that catapulted me up that learning curve.
o’neil has had a more
massive impact on the careers of more of this era’s most outstanding traders
than anyone else.
otherwise, i had nothing.
it was those early days
in my career that make me realize how fortunate newer traders are to be learning to trade in today’s wired world.
when I first began writing
about bonds and stocks on the net in late ’95, the only
other people doing continuous online stock commentary were briefing.
six months later in a san francisco closet,
thommy calandra, frank barnako, and
I hatched a site that would later be known as cbs marketwatch.
that was a lot of fun.
but it was also a lot of
fun to be writing to a sophisticated audience of readers — you.
in fact the best part
about it was not having to spoon-feed you with forecasts and tips like “cisco
is a buy above 60.25.”
you “got it”
without my having to do that.
many readers have thanked
me effusively for telling them on march 15, 2000 that i had moved my account to
a 100% cash position on march 14, two trading days after the march 10 bull
market top in the naz.
although i am happy for
them, i am happier for the people who have told me how much they have learned in
the process.
this is what
tradingmarkets.com is all about.
such as the young
gentleman with the dark, bushy hair who introduced himself after hearing me
speak at the international online trading expo in nyc.
i have chosen to dwell on what i
termed the “glamours,” short for what bill o’neil calls the “speculative growth stock
glamours.”
if you dwell in the intermediate term,
you get the most bang for your buck by concentrating on these issues when the
market’s running.
secondarily, they provide a superb
window into the speculative sentiment, so necessary for a durable market
advance.
third, what with their wide ranges,
they make xlnt. vehicles for daytrades.
otherwise, it is highly unlikely that the next
bull market’s leadership will emanate from the bells who helped carry the torch
in the last one.
in fact the bells themselves will
undergo a change of membership, as will the glamours.
indeed, this is already transpiring.
the greater the extent and duration of
a correction/bear market, the greater the likelihood of a dramatic change of
leadership in the bull that follows.
anyone who watched ibm — for decades,
the real
heavy — fall from grace in ’87, understands the vibe here.
it took nearly 10 years for ibm to
reach its ’87 peak.
the market doesn’t always take
prisoners.
therefore, those expecting the bells to just bounce
back like old times have another thing coming.
some will surely bounce back.
but not like old times.
the old times are over.
some will take years to bounce back.
some will never bounce back.
for proof, you can look back at all of
the busted radio, television, semi, and computer stocks over the decades.
the point here is a statement about the market’s
fluidity,
its dynamism.
and why, when it comes to aggressive
growth stocks, buy-and-hold only works in a bull.
because many of them never come back.
those living in a static world will
cling to notions conceived in the immediate past — and pay for it.
those living in a dynamic world —
traders, more than likely, as opposed to buy-and-hold investors — won’t have
preconceived notions about anything.
they will be the survivors.
there was once a bull in the early
‘twenties.
commodity inflation brought it down in
’21.
along came another bull.
the most famous one of all.
participants, noting the absence of
commodity inflation, were more bullish than any other time in history.
another type of inflation — an
inflation in margin debt — brought that bull down in ’29.
along came another bull.
participants, noting the absence of
commodity inflation and excessive margin debt — were quite confident of its
eternity.
another type of inflation — that of
inventories — brought it down in ’37.
don’t live in the past.
history rhymes, but doesn’t repeat.
change: the only constant.
it’s been real.