MARKET COMMENTARY – Friday July 1, 2011 posted @ 9:38AM/ET
Over the past several weeks the market has moved from “oversold” to “overbought.” We know these to be risky words if taken too literally. The market’s overbought condition is certainly no secret; as a result, everyone seems to be expecting the market to falter soon.
In the short run, with the end of the quarter buying completed and the major averages moving back up to trend, this may turn out to be correct. However, in my experience, major declines often begin as oversold conditions and major advances begin overbought.
The market certainly could pull in here 2-3%; this is precisely what you should be gauging going forward; how the market holds up, but more importantly, how individual stocks hold up during an eventual pullback. We have no way of knowing for sure if the market correction is indeed over. We do however see some compelling evidence that a new uptrend may be underway.
The following suggest the correction we just experienced is within an on-going bull market and the best stocks have already made their lows:
• June 21, 23, 29 – the NYSE Composite displayed what we would characterize as important accumulation days with no distribution in between
• June 21, 23, 29, 30 – the NASDAQ Composite displayed what we would characterize as important accumulation days with only one distribution day occurring, which was questionable due to index rebalancing
• Recent stock breakouts occurring during the span of accumulation days have held up quite well
• June 30 – our risk model flashed a buy signal (As of Thursday, all four component models that make up our overall risk model moved to the buy side.)
• Our long-term general market work indicates the long-term trend is still in-tact and the fundamental backdrop remains bullish for stocks
We have scaled into stocks in the following manner:
• On June 22 – twenty-five stocks met our criteria and were moved to our Buy Alert list. We selectively added six names long to our MPA portfolio as initial "test the water" buys.
• June 28 – we added an additional five longs for a total of eleven positions. Our Buy List continued to expand.
• June 30 – we are long nineteen names in the MPA portfolio with thirty-five names on our Buy Alert list which were cumulatively added during the week.
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BIOGRAPHY
Mark Minervini traded his first stock in 1983. He invested in a few hundred shares of Allis Chalmer, a seller of tractors and forklifts. Soon after, Minervini became familiar with the work of Richard Love, author of the book Superpeformance Stocks: An Investment Strategy for the Individual Investor Based on the 4-Year Political Cycle. Love’s work had a profound influence on Minervini’s professional and philosophical views on investing and the formulation of his own investment strategy.
By his early thirties, Minervini was at the helm as President of a leading institutional research firm in New York City, advising hedge funds and institutional investors in the U.S., Canada and Latin America. During this period, Minervini also kept a demanding schedule of regular television appearances on CNBC, CNN and Fox News.
It was Minervini’s initial intention to simply support himself from his trading profits, but his well-timed investment decisions increased his wealth dramatically each year, as well as the popularity of his opinion. After a decade of studying and trading the U.S. stock market, Minervini founded Quantech Research Group, Inc., an institutional research firm, in 1993. Minervini made available for a fee, to institutional investors, his in-house research based on his methodology Specific Entry Point Analysis® - SEPA®. Clients paid as much as $10,000 per month for Minervini's stock recommendations; his clients list included some of the biggest names on Wall Street.
By his early thirties, Minervini was at the helm as President of a leading institutional research firm in New York City, advising hedge funds and institutional investors in the U.S., Canada and Latin America. During this period, Minervini also kept a demanding schedule of regular television appearances on CNBC, CNN and Fox News.
It was Minervini’s initial intention to simply support himself from his trading profits, but his well-timed investment decisions increased his wealth dramatically each year, as well as the popularity of his opinion. After a decade of studying and trading the U.S. stock market, Minervini founded Quantech Research Group, Inc., an institutional research firm, in 1993. Minervini made available for a fee, to institutional investors, his in-house research based on his methodology Specific Entry Point Analysis® - SEPA®. Clients paid as much as $10,000 per month for Minervini's stock recommendations; his clients list included some of the biggest names on Wall Street.
In May of 2004, BusinessWeek wrote, "Minervini sells what's often considered the holy-grail in investing.”
To demonstrate the capabilities of his SEPA® Technology, Minervini entered the 1997 U.S. Investing Championship with his own capital. He won the real-money investment derby with a 155% return for the year, nearly double the results of the next nearest competing money manager. In fact, Jack Schwager wrote in Stock Market Wizards: Interviews with America’s Top Stock Traders: for the period 1994-2000, “Minervini's performance has been nothing short of astounding. His average annual compounded return during the period has been a towering 220 percent. Most traders and money managers would be delighted to have Minervini’s worst year – a 128 percent gain – as their best.”
In 1998, Minervini publicly voiced two back-to-back market calls, which shortly after propelled him into the media spotlight. On the August 28, 1998 Cavuto Business Show – Fox News Network, Minervini discussed the statistical similarities between the market then and the market on the Friday before the "Black Monday" crash of 1987, in which the Dow Jones Industrial Average declined 508 points in a single day. The Monday following Minervini’s appearance (the very next trading day), the Dow Jones Industrials fell 512 points. One month later, Minervini turned bullish. In a September 28, 1998 profile titled “Trust the Computer,” Barron’s wrote: “Minervini was still bearish on the market until last week, when he did an about-face and turned raging bull.”
He recommended, among other stocks, Yahoo, Broadcom, Network Appliances and Abercrombie & Fitch, all of which went on to score spectacular gains as the stock market entered a new bull phase. Twenty months later, Minervini turned decidedly bearish. On May 30, 2000 on CNN, Minervini said that the NASDAQ had entered a bear market and that the bear market would continue. He explained: “Oracle, EMC, Cisco, Nokia – some of these favorite big-cap NASDAQ stocks that have been holding up quite well – they’re going to give way now, and that’s really going to unsettle investors.” Minervini previously had called for a steep decline in the Internet/dot.com sector on the same network on March 30, 2000.
He recommended, among other stocks, Yahoo, Broadcom, Network Appliances and Abercrombie & Fitch, all of which went on to score spectacular gains as the stock market entered a new bull phase. Twenty months later, Minervini turned decidedly bearish. On May 30, 2000 on CNN, Minervini said that the NASDAQ had entered a bear market and that the bear market would continue. He explained: “Oracle, EMC, Cisco, Nokia – some of these favorite big-cap NASDAQ stocks that have been holding up quite well – they’re going to give way now, and that’s really going to unsettle investors.” Minervini previously had called for a steep decline in the Internet/dot.com sector on the same network on March 30, 2000.
During the March 30 CNN interview, Minervini said: “Many of these (Internet) stocks are going to go down between fifty and as much as eighty percent and some will go the way of Dr. Koop (bankruptcy).” Twenty-eight months later the NASDAQ Composite Index was down sixty-five percent, while Oracle, EMC, Cisco and Nokia were down an average of eighty-three percent. Minervini had avoided one of the most devastating bear market declines in stock market history. He protected his personal portfolio and locked in his gains by going to cash before the decline hit. With the exception of a few well-timed short trades, Minervini sat idle in cash through what was nearly a three-year bear market before returning to the stock market on the long side.
On May 10, 2004, BusinessWeek reported: “Jan. 9 Minervini bought Taser (TASR/NASDAQ), a company that makes Taser guns – nonlethal weapons for police departments. He spotted its potential using his proprietary methodology, "Specific Entry Point Analysis" (SEPA); he then rode the stock up 121% in only six weeks.”
Minervini’s achievements led to his recognition in Stock Market Wizards: Interviews with America's Top Stock Traders, by best-selling author Jack Schwager. A chapter in the book is devoted to Mr. Minervini and highlights his investment philosophy and money management approach. Schwager noted that Minervini's exceptional returns tell "only half the story." Mr. Schwager wrote: "Amazingly, Minervini achieved his lofty gains while keeping his risk very low: He had only one down quarter – barely – a loss of a fraction of 1 percent.”
On May 10, 2004, BusinessWeek reported: “Jan. 9 Minervini bought Taser (TASR/NASDAQ), a company that makes Taser guns – nonlethal weapons for police departments. He spotted its potential using his proprietary methodology, "Specific Entry Point Analysis" (SEPA); he then rode the stock up 121% in only six weeks.”
Minervini’s achievements led to his recognition in Stock Market Wizards: Interviews with America's Top Stock Traders, by best-selling author Jack Schwager. A chapter in the book is devoted to Mr. Minervini and highlights his investment philosophy and money management approach. Schwager noted that Minervini's exceptional returns tell "only half the story." Mr. Schwager wrote: "Amazingly, Minervini achieved his lofty gains while keeping his risk very low: He had only one down quarter – barely – a loss of a fraction of 1 percent.”
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DISCLAIMER: The information provided herein is not to be construed as an offer to buy or sell stocks of any kind. The stock selections on this blog are not to be considered a recommendation to buy or sell any stock but as is a mere form of expression on the writers part. It is possible at this or some subsequent date, Mark Minervini, the editors and staff of Minervini Private Access, LLC and MinerviniPrivateAccess.com may own, buy or sell stocks presented here. All investors should consult a qualified professional before trading any stock. Mark Minervini is not an investment advisor, nor a securities broker. Information on this blog is for educational purposes only. All material presented herein is believed to be reliable but we cannot attest to its accuracy. Readers are urged to check with their own investment counselors before making any investment decisions.
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Reprinted from Investor's Business Daily
Mark, could you explain a little bit why you think the long term trend in stocks is still up? I see a lot of cyclists predicting that market should drop in a four year cycle low soon and these long term cycles are usually quite accurate.
ReplyDeleteThanks