Tuesday, May 24, 2005

The Big Picture: Don't Fight the Tape

Watching the tape at the old Harris-Upham brokers office 43 years ago was the first time I heard the phrase, "Don't Fight the Tape". Barry was quick to switch from the big bear to the bull mode. Barry is to be congratulated for having the
good sense not to get locked into a bearish stance.

One of his readers asked about the buy and hold philosophy. A permanent Bull will make excellent money by practicing the buy and hold approach. A paramnet Bear will eventually get burned and burned badly.

I have been pushing stocks hard since August of 2002. I have remained bullish now for almost three years. It has been a joyous ride. The worst four months were January through April of this year. The good news for my family is that we "loaded up the truck" in February, March and April and are currently sitting on net new high portfolios.

Barry correctly notes that the speed of the turn implies that the market may take a rest before the next big surge. It does not matter. It is a mistake to try to catch a bull market on pull backs. It it is truly a bull, the market is not going to let you in cheaply. You have to lasso a bull at full run if you hope to catch the biggest part of the move.

Which sectors is a tough question. Defensive issues have done well as have technology. Gold, materials and energy have gotten slammed. Oil could bounce again but I am betting the other way. Our most recent additions have been in technology, airlines and a couple of weeks back we added online brokerage stocks.

Another way of saying, do not fight the tape, is to buy relative strength. Technology, airlines and online brokerage stocks are out-performing the market. Google is another stock that is making a big push. Expectations are that Google will be added to the S&P 500 index. Institutions currently under-own Google. Million's of shares will be purchased by the index funds if the stock is added. I suspect that the stock will be trading over $300 per share before it is added.

The BULL is in a stampede. Hop on a horse and ride with the heard or get out of the way! The market would have loved a kill the filibuster vote today but before the day is out, I suspect the market will have turned up. The Dow is down 29 and the NAS is down 5 at this moment.