EARLY EDITION JUNE 30
1. HOLIDAY MARKETS
2. UNDERVALUED STOCKS
3. QUOTES
4. ON THE WEB
5. IHI
6. LETTERS
Next week would normally be a quiet week with the July 4th Holiday. However, even without 3 eclipses (according to the Stock Traders Almanac), July could be a terrible month. Recently, it has been the worst month in election years, being down 6 out of last 8 times! As to July 3 itself, the first trading day of the month, they note that in the last 9 out of 10 times it was up. This year that would assume the Mexican election went smoothly, which is not a safe bet. As to July, we see it as choppy - a great trading month, but not worth throwing cash at these levels for long term investments, except for special situations.
How long will the DJIA (Value) and NASDAQ (Growth) inverse on most neutral days? Perhaps just till the Lunar eclipse mid-month. Thereafter, marching orders may be more coordinated.
Key Dates: July 14
DJIA: 10500: Floor or Ceiling?
NASDAQ: 4000 Ceiling
OIL: Sell
2. Never say Never: ATT dropped to our S3 support 32 last week, thanks to incredibly poor market relations and timing. Still, we believe it is a relative bargain and have continued to accumulate its stock ahead of Jupiter's entry into Gemini on last Friday. Honeywell circa 30-32 is also on our radar screens as an undervalued DJIA stock. Unfortunately, its intermediate/longer term horoscope indications are mediocre to poor. However, we may buy Xerox, which around 17 1/2 has favorable risk/reward both as a short term trade or intermediate term investment.
3. “Markets are beginning to become extremely sensitive to earnings
disappointments.”
Paul Horne, Schroder Salomon Smith Barney
HW: That is because pre-Jupiter/Saturn, earnings didn't seem to matter,
while post-Jupiter/Saturn (May 2000), they do.
“I can't emphasize enough that this next phase is going to be
all about stock selection. Playing a theme just won't work."
John Johnston, fund manager, Murray Johnson's Smaller Companies
Fund
HW: Agreed.
4. Why
a Love Affair with Red Ink? David Pauly
HW: Contrarian Thinking! :)
SOLAR
CYCLE UPDATE NASA
HW: Sunspot activity should reach a maximum in mid-2000, which many
believe correspond to a market peak.
5. From a WSNW reader:
" Since late 1999 I've been soliciting her predictions on direction
of the NASDAQ, and a couple isolated stocks, and found her predictions
of price direction pretty accurate, though like many psychics, her timing
is often slightly off. I generally wait till the trend she's described
starts before making my move. She gives her answers by describing
a graph relative to a horizontal line, where the "line" is roughly where
the stock or index is at the time of the question. (She often gives
insights on what's going on inside the company with the management as well
but that's often hard to verify.) I asked her in early June 2000
about IHITF, without telling her anything about the company. She
said the stock was going to take a couple more big dips, then within a
few months start a ratcheting up pattern that would overall, just keep
going up and up. She said that there would be a noticeable improvement
in six months, and it would be significantly higher in 2-3 years, which
is consistent with your reader who had the Indian astrologer's reading,
then the price would just keep going up over the next 5-10 years.
In fact, she says she really wishes she had some money to invest and knew
how to do it because that looked like an excellent stock."
HW: I am posting this, as many psychic, as well as astrologers, worldwide
seem to agree. BTW: I am one of them.
6. Reader: Score one in the publicity camp for astrology: Traders
Find 'Gold' in the Stars
HW: Good show.
READER; This is just a quick note to ask you what the astrological prospects
are for WAMX now...? I also noticed that the trading suspension was
announced at 9:30 am this morning -- during a Void of Course Moon - for
whatever that's worth.
HW: Despite Pluto on the Midheaven of its First Trade Chart, and their
being under Saturnine influences in June, I did not see this coming.
Wamex's business plan made good sense to me. Whether they would succeed
was then, and even more so now an open, high risk question. However,
their astrological aspects do seem more temporary than terminal to me.
Depending on what the facts are, its shares could fall significantly
or become worthless. Whether it is right to sell (or even buy)
depends to a large extent on one's tolerance for risk. I simply don't
know. We ourselves are going to wait and see what unfolds for the next
few days before deciding. Of course, by waiting, we may also miss
any opportunity to salvage any value.
READER: I am one of your newer subscribers. Unfortunately, I bought
Wamex one day before the bad news. What bad timing! I only
bought 2.5% of my total portfolio worth of it, but still what a bummer.
The only other small cap I got was IHITF @ $.58 . I think my lesson
is to only invest 1% if I do any other small caps except IHITF I will do
more.
HW: Often 1% is the recommended exposure limit in big portfolios.
However, depending on the risk/reward, up to 5% could be appropriate for
a single position/sector group.
READER: I think I should divest my Wamex stocks until the dust clears
if possible. What is the best way to do this? ....How does this pink
sheet stuff work?
HW: The Pink sheets are a very, very minor listing and very illiquid,
i.e. large bid/ask spreads. If you sell, I recommend giving a price
limit, NOT a market order. However, if you give a price limit, it
may NOT be filled. No matter how you look at it, it's not pretty.
It is possible they will trade again on the OTC, which by comparison is
a much fairer and transparent market.
In the worst case, you have a tax loss. Decide at what price you will
accept a loss: 50%? 75%? Or perhaps wait and see if they have value.
This is an individual choice. By the way, as you know, I always recommend
buying in a group basket. Fortunately you bought IHITF at a GREAT price.
Assuming you bought an equal amount of WAMEX, all you need is a double
on IHITF to be even.
READER: 1) What target are you looking for on GM - 60,50,40. I
already bought 100 @ $66 a week or so ago as I wanted to get before the
end of the month but now think I did too early. Do you always send
an email when you think it's time to buy a targeted stock like this at
T.
HW: No we do not. Our 12 month target for GM is 70-72. Therefore, we
would be happy to buy 50-55.
2) What is IHI day on Aug. 15 about? Is there a special
event going on? You have made reference to it but I didn't see why
it is so important.
HW: Yes, each year they have a party event at their factory- it is
good PR and shareholders usually get excited. Being close to Fall production,
it could help the stock price.
READER: I bought T at 34 on your recommendation and now it seems to
be the disaster of the whole sector. Do you feel that Jupiter will
turn it around?
HW: Yes. July should be a good month for ATT. In spite of the
fact their management is somewhat incompetent and market insensitive, our
target remains 42-45 in 12 months.
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