1. MARKETS
2. CANADA
3. QUOTES
4. LETTERS
STOCK MARKET MADNESS
July is a great month for traders, but how can investors relax when
markets rise and/or fall 3% a day? Is it possible to avoid stocks
with potential "earnings shortfalls" that result in 36% or 44% drops in
ONE DAY, e.g. Informix, Computer Associates?
What is perhaps most scary is that this may also happen to top tiered
companies. The average stock mutual fund barely returned 2%, under performing
money market funds. How will "buy and hold" do in the second half
of 2000? That depends on what you own. Almost no TECH stocks are SAFE at
current prices in my opinion, unless they have corrected at least 50% from
their 2000 highs.
I believe the (obvious) answer is to AVOID, NOT OWN, TOO MANY High
Tech, but NOT High profit TMT Stocks! Technology, Media, Telecomms (TMT)
are simply too pricey.
Last time we discussed Honeywell and Xerox. Re: Honeywell: According
to Credit Suisse [June 23, [HON 36 5/8]:
"The stock is too cheap to downgrade. We believe it is a good
company, but we do not think the stock will go anywhere for a while.
We maintain our BUY rating for long term investors."
I agree, but only buy 30-32, if you want to lose less hair worrying.
I also reviewed XEROX astrologically this past week and found rather mediocre
astrological aspects after a reflex recovery. If we do any fire sale
buying (15-17 1/2), this will be more for a short/intermediate term trade
than a long term BUY, such as Honeywell.
We are rather pleased that Wall Street, Next Week subscribers were informed in a timely manner to SELL Oil and therefore were NOT surprised by the Saudi effect on Oil futures last week. Around 500, the XOI is now fairly priced on a relative market basis. However, unlike drillers, most refiners such as Sunoco (SUN), will benefit from $25-$28 Oil. Therefore Sun not only remains an intermediate term buy [33-34 Target], but it is also a trading buy on weakness such as last week.
According to the Wall Street Journal, "Nearly 75% of corporations plan to raise prices an average 4.7% in the next 12 months.... A year ago 60% said they planned to raise prices by 1.3%; six months ago, 71% expected to raise prices by 3.1%." I see a trend here- do you?
July 14 is our second July marker day. It is followed by the important Lunar Eclipse next Sunday and then by Mercury changing direction on July 17. These cosmic events should change market perceptions midmonth. We also expect Nasdaq to break out of its recent trading range of 3820 to 4045 by then.
Key Dates: July 14, 17
TSE 300: Begin Distribution
NASDAQ: 4000 Testing
2. Canada, next to Holland is favored astrologically at this time. We prefer the Loonie to the US$ (by 2.5%) in the 12-15 month time frame. Yet with the TSE 300 at records highs and closing in on the DJIA, it is time to consider taking some profits. Furthermore, while we have recommended Nortel (NT) , which is weighted over 30% of the TSE index, over Lucent recently, enough is enough. Take, or stop loss profits here and NOW. Nortel is, of course, cosmically aligned to Jupiter in Gemini. However, Saturn will keep Jupiter company in the sign of Gemini next month so don't be surprised by a short term correction in the near future up north.
Note: Investing in securities denominated in currencies other than the US dollar involves both risk and opportunity not typically associated with investing in US securities.
3. "When an asset is expensive, very minor disappointments can kill
the stock.''
Charles Pradilla, chief investment strategist, SG Cowen Securities
HW: So true.
"Actually, analysts of the fixed income market are frightened out of
their minds right now. They're worried that once holders wake up
one day and get frightened by the accelerating inflation, they'll start
dumping long bonds.... The Fed's now in a policy box of its own making.
They can keep pumping in reserve and cause inflation or raise interest
rates and cause recession. I think the Fed has blown it."
Dr. Robert H Parks A Grand Illusion, On Wall Street July 2000
HW: I agree.
"We do have a lot of numbers between now and the Fed's next meeting,"
Alston said. "That could totally reverse psychology and we could see a
6.50/6.75 two-year (yield) if (economic data) come in a lot stronger and
people start fearing the Fed again."
Bruce Alston, fixed income director, Value Line Asset Management
HW: A positive 6.75 yield might beat returns coming out the US stock
market in the next four months.
4. READER: Which way do you think interest rates will go in next few
weeks?
HW: Up till August, then down late August and again in October.
READER: I don't know if you have been trading the OEX lately, I sure
haven't. But do you see a time frame in the near future that will present
one of those opportunities to make a killing on OEX puts options?
I also subscribe to Mark Leibovits Volume Reversal Survey. His annual
forecast model (I am sure it is based on cycles) is pointing to a treacherous
market after August of this year. I do not trade the OEX often, but
I am looking to enter puts sometime soon for one of those "triple your
$" opportunities that seem to manifest about two-three times per year consistently.
HW: If you look at our calendar in our Daily Market Commentary, you
will see one August, and later, one October WSNW Alert that provides a
double-your-money opportunity at reasonable risk.
READER: RE: Celsion- I can see the share price at 50.00 very soon!!!
HW: Maybe. Current market action looks strong. If it continues, a quick
trade from to 4 to 6 seems possible. Note: I still own my investing
position.
READER: What is the difference in service between the $300 subscription
and the $1000 subscription rate? I currently paid $300 for a quarter.
If I went to a $1000 per year subscription can we apply the $300 and I
would pay $700 difference for another 9 months.
HW: It is the same service, just with a 20% discount for annual billing.
If you renewed within the last month, you can write back and authorize
a $700 charge and will we will send you the additional 9 months.
READER: Bought it [T] yesterday at 32. Do you ever write covered
calls on your positions? I was considering writing the January 40's
once the stock price moves up a little--to the 35 area.
HW: Yes, writing covered calls such as the TAH can be a good strategy.
However, I would personally wait until the end of July before doing it.
READER: Computer Associates got hammered today because of earnings.
You had mentioned previously that CA is one of the better technology stocks
and should be bought at a 50 percent drop off its March 2000 high or maybe
at its 52 week low. Well, it's way below either of those points now. I
haven't bought any so far (thank goodness), but do you consider it a buy
now, or does the earnings disappointment taint the stock now?
HW: We are looking to do a small buy if it drops to around 25, although
it could go as low as 22. On the other hand, with such cautiousness, we
may lose an opportunity. If so, so be it; I like to sleep soundly.
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