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Market Participants
Petrified: Paralyzed By Recent Past |
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It was a classic Mexican standoff
this past week. Neither the Bulls or the Bears were able to get momentum.
The buyers strike continues, as the market is paralyzed by nightmares of
the recent past. Sellers have little left to sell, and shorts are locking
in profits. Amazingly, the NASDAQ COMP opened at 1904 and closed at 1904
this week.
Headlines were dominated by the media's
frenzy to report on horrific prison abuses (no mention of what happened
in those prisons when Saddam was running the show), skyrocketing oil prices
(which is a major negative), interest rate increases (already fully priced
into the market), and a murky Presidential race (the Kerry Trade). On the
plus side, earnings reports are extremely robust, and there is no deterioration
of forward looking forecasts. Disney, Dell, and Cisco delivered blockbuster
earnings this week.
It is estimated there is about $1.1
trillion in hedge funds. For the most part, it is "hot money". Many of
these hedge fund managers are afraid to invest for the long term. They
are trapped in the nightmare of Fall of '00 to Fall of '03. They're bonuses
are annually tied to last year's "high water mark". Therefore, they are
quick to pull the trigger at the slightest sign of price deterioration.
Today's investor would do well to
remember the great bear market of the early 2000's only happens once a
century- just like a 100 year flood. While we may or may not be in a period
of retracting prices from here forward, the conditions do not exist for
another major bear market. Valuations are nothing like they were in March
of '00. I believe it is an ideal time to accumulate your favorite positions
for profit taking in the October to December time frame. As I pointed out
in last weekend's edition, today's climate mirrors '92-'93. The market
took off in September of '92 and didn't look back until March of '00.
I liked an interview I caught with
John Bollinger- the technician who's father invented the famous "Bollinger
Bands". He believes it will be tough to make money in large cap stocks
throughout the remainder of this decade. He thinks an index fund in the
S&P 500 will give no better than 3% to 4% for the remainder of the
decade.
His view: there is a lot of money
to be made in equities- you have to be in the right stocks. He says buy
small companies with great growth prospects. That's where you will make
money.
In light of this past week's action,
we could be vulnerable for a sell off into the 1800 range on the NASDAQ.
We could just as easily rally above 2000. Either way, now is the time to
accumulate your favorites for big profits in the 4th quarter.
It won't be long until fear turns
to greed once again, and those petrified fund managers will be piling back
into stocks. I have been picking up some of my personal favorites on pullbacks,
content in the knowledge that you make the most money when you buy at the
point of maximum pessimism.
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NetWork
Installation (OTC BB: NWIS) Delivers Impressive Snap Back |
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Network Installation got clobbered
in one of the big sell off days this week, and the stock staged an impressive
comeback. Technically, the rebound was far more important than the pullback.
I have been reporting on this company
since last July, and it has been a standout winner for OTC Journal
members. My first report on the company was published when the stock was
$.80, but it traded up so quickly investors had no chance to accumulate
until it was about $1.80. The stock closed at $4.50 on Friday.
The chart is telling: Despite the
abrupt pullback, it was clearly a market environment where the traders
were happy to let it drop and spook out short term sellers. The volume
tells the whole story. There was one down day with moderate volume. Up
days over the past several months have been on much higher volume levels,
suggesting most shareholders are content to wait while the company continues
with its strong growth.
A macro view of their industry tells
the whole story. They build infrastructure for wireless internet access.
The market is predicted to grow 10 fold by 2007. The company has been announcing
a steady stream of contract wins, and has opened in four new locations
this year alone. During the month of May the company announced two major
new contracts.
The brief pullback in the stock under
$4 was greeted by enthusiastic bargain hunters, and the stock only spent
a few trading hours under that mark. The support/resistance lines as viewed
over the longer term demonstrates a stock which is clearly in an uptrend.
NWIS
would not trade below the 33% retracement level for more than a few hours.
I believe this company will continue
to grow rapidly this year. Growth is likely to come both organically and
through acquisition. I expect the company to expand beyond the So. CA/Las
Vegas markets and establish a nationwide footprint. If they achieve these
benchmarks, and upgraded listing (i.e. AMEX or NASDAQ Small Cap) could
be in the cards.
Recently, I was in the Jet Blue waiting
area at Kennedy Airport in NY. Guess what- they offer high speed wireless
internet access in the waiting area for free. Someone installed the infrastructure.
Jet Blue has embraced the digital revolution, and it is reflected in their
growth. People want and need these services. By 2007, it will be everywhere,
and someone will be installing and maintaining it.
The drop from the $5.50 level to
the $4.50 level is an opportunity to accumulate. Looking for much higher
levels later in the year as NWIS's expansion continues.
Charts Provided Courtesy
Of TradePortal.com |
