After having my head handed to me over the last 9 months, I am trying to develop a daily routine whereby I examine various indicators, stock sectors, indices and volume to help me get a better handle on market sentiment. Do you have such a routine, and if so are you willing to share it? I am a real rookie at this game and need all the education I can get. I just seem to be wallowing in a sea of information that I don't know how to use or how much importance to attach to it. I have read each and every report that you have sent for the last several weeks and am impressed with your ability to analyze what's happening. You're far more accurate than your competition. (January 22, 2001)
Yes. First, we look at the overall price and volume action on several indexes, e.g., Dow, S&P 500, S&P Mid-cap, Nasdaq, Russell 2000. We look at the A/D line and the candlestick chart as well to determine the overall health and action of the market. We have several sectors we look at each day after the close: semiconductor, networking, optical, software, computer peripherals, financial, drugs, biotechs, retail, scientific and technical, and others that may show up with unusual volumes on market scans. We also have a list of stocks with leading earnings and revenue growth that we take an individual look at each close. Those give us valuable insight into where the 'big' or 'smart' money is or is not going. That helps develop a picture.
When we look at each area we look at price and volume and any patterns that are forming. That takes a practiced eye to do quickly, but there is nothing like looking at the chart to get the feel. While doing this we look at relative strength (compared to the S&P 500) and some momentum indicators (MACD, stochastics, though these are way down our list). If we find a stock we do not know but looks good, we have to check the details; boring and hard, but necessary. Those include money flow, earnings growth, revenue growth, relative strength, institutional buying or selling. That tells us if this is just a pretty face or if there is something more substantial there that can get us involved in the stock. If it passes muster at this point, it is a definite candidate, and we then start ranking it in relation to all of the patterns we see that we like. Then we cull and come up with the best plays. All in a few hours after the market closes.
We are preparing a seminar series covering our philosophy of investing, our method of technical analysis, stock splits, covered calls, spreads, options, and a host of other investment strategies we incorporate. These should be ready to go in March or April. We will let you know when we get set dates.
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