Things Are Looking Brighter

May 8, 2001
Tim Truebenbach

Not bad, not
bad! Things are shaping up a lot better than they’ve looked over the
past year. We’re seeing institutions buying stock across the entire market and
in leading sectors. Of course, not everything is perfect, but as Marc Dupee
recently said to me over the telephone: “Things seldom are perfect.”
The S&P 500 logged one day of distribution last Monday, but was quick to
combat it with slight accumulation on Wednesday and trade tapering off the
remainder of the week.

Daily
chart of S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) with NYSE volume.

We have been drifting now for the past
few days with not much in the way of major news to affect us until after today’s
close, with Cisco Systems
(
CSCO |
Quote |
Chart |
News |
PowerRating) reporting earnings. Next major news comes
next Tuesday when the Fed reconvenes to mess around with interest rates. It will
be a good idea to see what type of market action comes out of these major news
items. They should add some additional volatility that will help see more
obvious signs of the larger buyers stepping in and out of the market.

Individual stocks continue to break
successfully. Most of these stocks are coming from retail, leisure and building
sectors. Many of the names have been forgotten about or lost among the tech
names. For this reason, many these new leaders do not command much market cap
and fall under either small or midsize capitalization. The greatest thing about
this is that most past winners started as small or mid-caps and grew so much
that they became large-cap stocks everyone knew about! Here’s one breaking out
as I speak and you’ll know as soon as I do about how it ended up today:

Just remember that if you play in
these closely held, small-cap names, play it close to the belt and keep the
tight stop in there and use good money management. Since these names tend to
move quickly, one idea on money management may entail putting less capital into
these stocks than a slower moving mid-cap. Try and think in terms of percentage
terms when relating to the moves a stock makes instead of dollars.

Nvidia
(
NVDA |
Quote |
Chart |
News |
PowerRating) is another stock
I’ve been keeping my eye on, as it’s been one of the first tech names to try to
break out. The base is loose and a little too sloppy for me, but it did manage
to pass the pivot of 90.12 on about a 35% increase over the 50-day average
volume. I like to see volume exceeding 50% of the average and I definitely
didn’t like seeing NVDA pull back below its pivot. I’m not saying it won’t work,
because a rising tide will carry all ships, but I do say that it carries too
much risk for me.

One of the first breakouts of the
“Building” stocks was Pulte Corp
(
PHM |
Quote |
Chart |
News |
PowerRating). It’ll be interesting to
see how this one acts following the news of its intent to purchase Del Webb on
May 1. Obviously, it would be nice to see it move to a new high following a
brief and volume-less consolidation.

A few of the recent breakouts have
moved back into previous areas of consolidation and have been wavering above and
below the pivots. This is worth noting, and using as motivation to continue
using a stop-loss to limit downside. Be sure to pass on stocks that don’t show
you everything you are looking for in a new buy. As a bull market
progresses, there will be scores of stocks that can be bought, definitely too
many for any one investor. Choose the best merchandise for the inventory of your
portfolio.

Until next week,

Tim

Things Are Looking Brighter

BUY THE FEAR, SELL THE GREED

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