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Apr 23, 2007 - Issue #055



Bull or Bear?



Dow score card for the week ending 4/20/07.

DJ-30: 12961.98 +349.85 +2.77%. In the Real World: 53.17 +1.44 +2.77%.

UP: 24, Down: 6.

Trends (weekly): This is the subjective part.

Rising 18 (+3) 60%:

AXP, +*BA, CAT, +*DD, DIS, GM, +*HD, HON, HPQ, IBM, JPM, KO, MCD, MO, MRK, +*MSFT, T, XOM.

Consolidating 11 (-2) 37%:

-*AA, AIG, C, GE, +*INTC, MMM, PFE, PG, UTX, VZ, WMT.

Declining 1 (-1) 3%:

JNJ.

+/- denotes change of direction.

* denotes change of category.

Bull or Bear?

The above data looks really strong, doesn't it? And it is. After all, 24 out of 30 components up on the week is impressive. And some of them are really up a lot.

The question often being asked on CNBC is: Is this an upward continuation of a bull market or is this a bull trap?

The fact the question is even being asked indicates apprehension exists in the minds of many investors which, by itself, is an indication the market is probably headed higher.

At market tops, people don't have pessimistic thoughts. Caution is the last thing on their minds. Greed is the controlling emotion at market tops.

That being said, keep in mind there is no such thing as a stock market. What exists is a market of stocks. Averages are misleading.

Sort the individual stocks of any average according to relative strength vs. the S&P 500 index 1 year ago, both the strongest and weakest, and it will be apparent that each stock is in its own individual rising, declining, or consolidating trend.

In real estate, it's location, location, location. With stocks, it's timing, timing, timing.

Stocks spend one third of the time rising, one third of the time declining, and one third of the time moving sideways.

If you only think in terms of buying long, you will be losing money two thirds of the time.

Professional traders are comfortable whether they are long, short, or in cash. And, yes, cash is a position. When in doubt, get out. Go to cash. Cash is king.

There are no good or bad stocks; only stocks that are rising, falling, or getting ready to do one or the other. Sit in cash and then, like a surfer, go with the flow.

That's trading.







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