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Börsipäev 24. oktoober

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  • Rev Shark:

    Patience Needed for Proof of Market Shift
    10/24/2005 8:57 AM EDT

    The temptation to form premature theories upon insufficient data is the bane of our profession. -Sherlock Holmes

    Shark HQ suffered a glancing blow from Hurricane Wilma early this morning, but the power is up, our Internet connections are in place and we are good to go. We hope our friends to the south haven't suffered too much damage.

    On Friday, I discussed the theory that the market may finally being undergoing some sort of sector rotation out of groups that have lead for a while -- such as oils, commodities and heavy cyclicals like Caterpillar (CAT:NYSE) -- and into technology. There were some signs that this theory was actually working a bit that day as the Nasdaq and Nasdaq 100 outperformed, but there is still insufficient data to fully embrace this idea.

    I've preached loudly and often in this missive that market participants should not be overly anticipatory. If and when a good trend emerges there will be sufficient time to profit from it. Catching the bottom tick is nice, but that is a high-risk strategy. A good market trend should last weeks or months and if you miss some of the initial move, it doesn't matter much.

    Being anticipatory in action doesn't mean that you shouldn't form theories and hypotheses about where the market is headed. Having a theory allows you to act quickly and more decisively when there is more data in place to prove that you are on the right track. I see far too many market participants who think that just because their market theory sounds logical and reasonable that it will inevitably occur. In most cases, even if it does work out as they expect, their timing is so off that they fail to profit as well as they might if they were patient and waited for some facts to back up their theories.

    I'm hopeful that a shift into technology may indeed be occurring, but we need more data to back that up. We need to see continued outperformance by the technology heavy indices and relative strength in semiconductors, software, networkers and Internet stocks. Market shifts of this type don't occur smoothly and easily, but there are some promising signs and we should stay aware of the possibility.

    We have a positive open on the way. Crude oil is back below the $60 mark, European markets were acting well while Asia was mixed, the dollar is a bit weak and gold is pulling back again.

    Position: No positions in stocks mentioned.

    Gary B. Smith:

  • Mr. G. asemel siis Mr. B.

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