To OTC Journal Members:
 

Market Comment- Long Overdue Correction May Be in the Cards

Here's a chart of the NASDAQ Composite, as measured from early March when the new "BULL" was born. Pretty impressive. The market has inclined for nearly nine months without a 10% correction. Even in the go-go bull market of the 90's, the market never survived six months without at least a 10% correction.

We've been down for the last three days. Yesterday's earnings report from Merck (NYSE: MRK) put a damper on the pharmaceuticals. Amazon (NASDAQ: AMZN) came in with an adequate earnings report, and was rewarded with a 5 point sell off as a little reality returned to the market.

The ghost of the October 1987 crash is rearing its ugly head as it always does in the weeks preceding Halloween. I don't believe its a coincidence or a perennial event. I believe the annual October sell off is related to fund managers rebalancing their portfolios- ejecting losers and locking in profits well ahead of the all important year end day of reckoning. This might be the ultimate market manipulation to make fund managers look good.

All the technical reports I read every morning point to a long overdue correction. Most traders recognize Wall Street climbs a wall of worry, and no is worried, which has all the technicians worried (does that make sense?). Fear drives the market to higher levels.

I've included a couple of very simple technical indicators in the chart. Since this is not a technical newsletter, I like to keep it simple. The blue line represents support. The market has not broken below the blue line convincingly since this move began in early March. The index is trying to break below support right now.

If we break below the support line convincingly, I believe the trend will be broken and lower levels will be imminent. A break below support could take us down to the high end of the mid range (shown in red), below 1800. Coincidentally, nearly exactly a 10% correction from the top.

Don't despair- if this sets up, I believe it will be an outstanding buying opportunity. You'll know it's safe to buy again when the media trots out all the doom and gloom Bears who claim the economy is a mess, the recovery is jobless, and the FED is manipulating the money supply and interest rates to artificially stimulate spending. If the market drops, and these people are all over the financial press, it will be time to buy.

I clipped 20% off a QQQ put for my own account this week. I closed it out early today. However, a rally might get me back in. 
 

eReserch Technologies (NASDAQ: ERES) - Do You Still Own This One?

I wrote two editions on eReserch in the last year. Dec 2, 2002, and April 22, 2003. If you bought the stock and still own it, please email me at editor@otcjournal.com. 

On those publication dates the stock was trading at a split adjusted level of $7.45 and $13 respectively. Yesterday, the company reported blow out earnings again, and raised guidance again. If I only knew.

The stock is now trading at around $45, making ERES my best idea of the year. Penny stock VTSI moved up five fold at the high, but ERES has now moved up six fold since my first publication on the company. Of course, VTSI accomplished its move in a shorter time frame, so the annualized return could be better.

I wish I had written more on the company. Email me if you still own it- I would love to hear about it.
 

NetWork Installation (OTC BB: NWIS) Delivers Again

Question: Do you know what the best performing stock of the 90's was? Answer: Cisco. The stock rose, split adjusted, from under $1 to $78 during that time frame.

Question: Why? Answer: Because Cisco is the number one manufacturer of routers which direct traffic all over the internet. The explosion of the Internet was an explosion for Cisco, because they made the products that fueled the mania. Another good metaphor- they made the pick and shovels the gold miners had to buy to hunt for gold.

Question: What's next? Answer: Wireless internet access. Everyone is going wireless. Large and small companies. Homes. Government offices. Municipalities. Libraries. Schools- elementary to University level.

NetWork Installation will be in the middle of this explosion as it grows. Today, just after the close, the company announced it received another wireless installation contract using the Motorola Canopy solution. 

Accumulate up to $3.50, and there isn't much room left. The stock is heading for higher ground, slowly but surely.

Here is the complete text of today's news release for your review:
 

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