To OTC Journal Members:
 

Coming Attraction

Did you see the movie Minority Report? It came out in 2002, and was the first time Steven Speilberg and Tom Cruise teamed up.  It's a sci-fi thriller set in 2054. Tom Cruise heads a police squad with psychic technology charged with the duty of arresting murderers before they commit their crimes.

There's a fascinating futuristic scene in the movie. Tom Cruise is walking through a shopping mall. A specialized laser device performs an optic scan to identify him, and then advertises shopping opportunities to him in a multi media format based on his purchasing habits as he walks around the mall.

This technology, or something like it, is definitely the point of purchase advertising technology of the future. This is the way manufacturers and retailers will enhance sales at the point of purchase in the future.

Sometime in the middle of next week I will be publishing a trading alert featuring an advertising technology company gaining a lot of momentum. It could become the predecessor for futuristic point of purchase advertising. It might be the last new idea of the year. Keep an eye on your inbox.
 

The Market Is One Big Movie

Two weeks ago I read a great metaphor for the stock market. Credit Tobin Smith of Wave Wire for this concept. Since we're already talking about movies, I thought I'd share this with you.

Smith suggests you think of participants in the stock market as a giant audience in a huge movie theater. I like to think of each individual stock as a movie. Like movies, positions in your portfolio have a beginning, middle, and end. Sometimes the ending turns out great, sometimes not so good. Members of the audience may be watching the movie for different reasons, and during the presentation audience members will come and go.

Smith believes there are six different kinds of people watching these movies:

• Insiders, who work for the company and are committed for their careers. (they might be better thought of as the stars of the movie)
• Value investors, who perceive an underlying fundamental value. They may stay in for years hoping the market recognizes the value and rewards them with profits.
• Growth Buyers, who hope the company's high growth rate will support a much higher valuation over the course of six months to a year.
• Momentum Buyers, who only buy the stock because it's going up. I also like to think of this crowd as Swing Traders.
• Day Traders, who trade in and out in a time frame which may last only minutes. This is the stock market casino.
• Short Sellers, who believe the movie is overvalued, and expect the true value to be recognized over the next three to six months. In the microcap arena, I would include manipulative market maker collusion and illegal offshore short selling in this bunch.

I think this metaphor is useful to help define the roll of the OTC Journal. Nearly every idea I cover is primarily geared for growth buyers. When you participate, you are betting a high growth rate or positive future developments will take the stock higher over six to twelve months. You should also be prepared for a high degree of risk. Most of the companies I cover fall into the microcap category (market cap under $100 million), which by definition are unproven and risky.

Occasionally I will share an idea for swing traders. Never for day traders. Always risky. Therefore, if you are not looking for high risk growth stocks with a six to twelve month investment time horizon, this newsletter is not for you. If you can't handle risk, this newsletter is not for you.

I haven't published the Members' Forum for a while, but I answer every legitimate question emailed in. Simply email editor@otcjournal.com if you have a question about anything. If you want my opinion on a stock I don't cover, there is a good chance you won't get a comment. I just don't have time to research them all. However, you will get a candid and honest answer on any company I cover.
 

The Biggest Movie of All

Here's a chart of the big movie for growth investors. This is a six year chart of the NASDAQ Composite. It's the big picture, and I believe it's quite revealing.

Many technicians will tell you this is the chart of an index that has completed a massive six year head and shoulders formation. The completion of this formation is one of the most bullish charts imaginable. The top in 2000 is the head, the move back over 4000 is the right shoulder, and the formation was completed about one year ago. The whole process starts all over again as we move back up towards a new left shoulder.

Evidence suggesting both corporate profits and the economic environment is improving hits the news wires every day. As fundamentals continue to improve and stocks rise, I believe the audience for this movie is changing and evolving. I believe momentum players are being replaced by growth investors as investor confidence returns and earnings rebound.

I believe short sellers have left the movie theater for the time being, but they'll be back. They haven't like the way the plot is unfolding over the last six months, and the story line is causing them some pain. The VIX (volatility index) at 18.45 is proof the bears are temporarily beaten. Short term, this is not necessarily good- we need short sellers proven wrong to fuel the market to higher levels.

Over the next couple of years I believe the market could complete a 50% retracement of the drop, which would take us to about 3500 on the NASDAQ. This assumes the economy and corporate profits continue to improve.

The cycle should have completed some time ago, but 911, Enronitis, and war with Iraq derailed the normal cycles.

There will certainly be bumps along the way, but I sure like the chances for a happy ending in this epic movie.

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