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Market Comment- A Long Overdue Correction Has Arrived

A long overdue correction has finally sunk its teeth into the market. There may be more work to do on the downside before the market is positioned to begin its inevitable march North.

I direct your attention to the February 15th edition entitled "Value Doesn't Matter Until It Matters". You are looking at one of the charts I included along with the following comment: "If the market sells off more significantly we will be looking for support in the 1720 to 1810 range. This would be heaven sent for those who have been sitting on the sidelines waiting for a pullback."

For those of you who believe we are back in a Bear Market, consider the following facts: The analysts' consensus for Forward 52 week Operating EPS for the S&P is $64.65, up $0.61 for the week and at another new all-time high (at the end of last week). The PE on this figure moved down 0.3 to 17.2. Trailing 52-Wk Operating EPS now stands at $56.36, up $0.21 last week. The PE on this figure moved down .26 to 19.69. These PE ratios are a little lower today as the market has given some ground this week.

I also believe earnings comparisons from here forward will be less robust. The low hanging fruit of the market has been picked. The bull market will chug on, but you will have to be in the right growth companies to enjoy superior returns.

The second chart is based on today's market. I believe the market will trade down to the red line (about 1880 to 1900) at least twice, and then probably grind sideways before beginning its next leg up. Look out to tax day (April 15th) for a rough turning point. This will coincide with massive contributions to pension funds, 1st quarter earnings releases, and generally a seasonally stronger period.

Microcaps have been dropping this week, but for the most part on very light volume. Traders use these kinds of markets to make it appear as if the bottom is falling out, and spook investors into selling at a point of weakness. Don't fall into this trap.
 

Family Room (OTC BB: FMLY) Plans Remake of Rin Tin Tin

In a past edition on Family Room I suggested the stock was in the OTC Journal's dog house for underperforming. The market has been dealing with a unprecedented over head supply of stock related to past financings. No financings of this same nature are planned for this year.

I learned today that the management at Family Room has taken the "dog house" label to the next level. The company has chosen to embrace the concept, and today announced they are in the final stages of acquiring the rights to the legendary "Rin Tin Tin" story.

Family Room is currently investigating the "Chain of Title" to be certain there are no other claims before finalizing the acquisition. 

On another front, Justin Timberlake has been getting a lot of media coverage during the filming of Edison, which is currently in production in Vancouver, British Columbia. This is Timberlake's first starring role in a feature film, and both People and Us magazines recently published articles on his activities during filming. This film is certain to be highly anticipated. A quality product could yield substantial box offices profits for Family Room if the movie eclipses the $40 million mark.

As you can see from the chart, FMLY continues to grind between the $.10 and $.12 level. Volume levels are up considerably from 2003 levels, and I'm hoping the market will deal with the excess supply in short order.

As of today, in addition to Rin Tin Tin, Family Room is developing Micronauts and the Abominable Snowman with Gale Anne Hurd, producer of the Terminator series, Armaggedon, and the Hulk. 

The company is on track to deliver the best year in corporate history. The stock is trading at about 2X this calendar year's sales, and probably deserves to be much higher.

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