To OTC Journal Members:
 

Comments in the BLOG

It's been a busy week in the BLOG, so I hope people are checking for updates daily. In Tuesday's BLOG entry on the ZAPZ PR disaster, I suggested the stock was not a sell, but should be held for higher levels for a sale or bought for an oversold trade. I took my own advice, and made my best two day profit of 2005. Details can be found in Friday's ZAPZ BLOG entry.

In addition, in the BLOG this week I was able to recommend taking some profits in three different OTC Journal offerings. XNOM, TREN, and ZAPZ (if you bought on the beating) have been the receipients of suggested profit taking. This is a refreshing change from this slow erosion market of 2005. Please check the current BLOG entries on those stocks for the 411. Look for new BLOGS early next week on BPTR and GEPT.

To use the BLOG, simply go to the home page at www.otcjournal.com - the BLOG will scroll down automatically on the right side of your screen. The most current journal entries appear in the middle of your screen. Check back frequently for updates particularly when stocks are moving to overbought or oversold levels or in volatile markets. Your questions and postings do not automatically appear, so don't bother posting the same question multiple times. I personally go through to moderate and respond to every question.
 

Small Stocks Finally Perking Up

It was a fun week as I was able to suggest taking some profits for the first time in '05. XNOM and TREN have been unqualified winners. ZAPZ has been a big problem, but did provide an excellent trading opportunity this week. I hope Mercedes Benz bashes them again so I have the chance to buy it at $.95 once more.

Since my April 2nd edition where I recommended traders sell all their positions, I have been looking for signs of a turn up in small stocks. This five year chart comparing the performance of the Russell 2000, the DOW, and the NASDAQ Comp tells an interesting story.

It is evident from the chart that the NASDAQ Comp has been the worst place to have your market money since mid 2002. The DOW, which has been the beneficiary of commodity price appreciation, a falling dollar, and a return to old economy stocks has done well.

However, the best market returns have been notched in the Russell 2000 where the small stocks reside.

In 2005 small stocks have taken a beating, but there are signs we are now turning back up. For the first time this year I was able to suggest taking profits in three OTC Journal ideas. In addition, I have started seeing some other microcap stocks trade up an stronger volume levels than has been the norm.

The market has been sending mixed messages of late. The ideal environment for stocks is GDP growth at a consistent 3% to 4%, low inflation, low interest rates, and job growth.

The FED has raised short term interest rates a full 2 points in the last year, yet the 10 yr note continues to yield less than 4%.  The FED sees little sign of inflation, but we all know energy and real estate prices have gone nuts, so how can there be no inflation? Mid term bonds going up (interest rates down) suggests an economic slow down, yet corporate profits and corporate balance sheets are the strongest in history? Confused? So is the market.

I believe the market is simply adjusting to $50 per barrel oil, and now starting to respond to a continuing low interest rate environment. Perhaps mid June will be last year's mid August, and stocks will improve from here. It's a little harder to see with the slow summer months ahead, but nevertheless a rebound feels like it is in the offing.

Look at the way the Russell 2000 has broken away from the DOW over the last month. When money flows into small stocks, micros are generally not too far behind.

Here's a couple of ideas for the coming weeks:

• VirTra Systems (OTC BB: VTSI): has taken an absolute drubbing. Not only have military orders been delayed, but the entire homeland security/defense sector has been trading very poorly. VTSI is closing in on turning the corner, and the stock is so oversold a ZAPZ like bounce could be in the offing.
• NeWave (OTC BB: NWWV): The stock has been a bit schizophrenic of late, but I believe is setting up for a strong move to new highs. The company is simply kicking butt- 7,000 inbound calls per day and gearing up for 11,000 in the Fall. Some very high profile charity auction from their eBay drop off service are in the pipeline. Infomercial nationwide rolling out over the summer. The stock is stuck in a range between $1.50 and $1.75. One of these days the $1.75 will go, and the stock will take off.

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