Pre Flight Fund Trader for 2/6/02
Tuesday 2/5/02
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Real Money Seasonal Trading Account (New! All weightings are approximate)
80% Money Market
5% HGMCY (Harmony Gold).
30% Rydex Tempest Fund.
We are more than a little bit short and happy. The trend had broken and the market could easily fall out of bed. Still, we'd expect a little bounce. If the market is down hard, we may send out a memo to chose the above position. We were right about not dumping Harmony Gold. We only wish we'd bought our other favorite DROOY as well. These stocks are looking a bit toppy, so we may take a profit on strength tomorrow.
Our managed tracking account is up 16.98% for the 18 months since June 30, 2000. This is a very conservative approach (~1/3 the risk of the market), using both long and short funds as well as the occasional favored sector/stock idea. All performance is net of fees, commissions, and interest. Your results may vary, and standard disclaimers may apply. We DO use discretion. For further information, call us now. 
Active Model
Bot 33% Profunds Ultra Bear 10/2.
Bot 33% Profunds Ultra Bear 10/3.
Bot 33% Profunds Ultra Bear 11/15.
The market is driving us nuts, but the trend has turned. We have committed, perhaps foolishly, to holding this one. Cover all positions if we print 1065.
Hedged Model
50% Waterhouse Dow Fund (WDOWX)
25% Profunds Ultra Bear
The MACD is negative, and the Weekly MACD is negative. The Seasonal Cycle is positive, but now less so. We are Bears.
VIX Trader
Flat.
Sold 1/2 position in Profunds Ultra Bull from 1/16 a/o 1/31.
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Last time, I said that I had to look for a bounce, but I noted that since things really didn't get THAT overdone on the downside, I'd view the rally as a shorting opportunity. I suppose the rally yesterday, and failure fits that description, but it wasn't what I was envisioning. Clearly the market was a bit overdone on the downside, but it wasn't REALLY overdone. Yesterday's action, actually, didn't really help the market's prospects. Certainly, a rally can materialize, but i don't have absolutely compelling reason to expect it to occur or that it will be much to write home about, as yet.
I am a bit surprised that the ARMS Ratio (aka the TRIN--a volume and breadth measure) close above 2.83 didn't trigger a rally yesterday, and the fact that it didn't may be an indicator of just how weak the current market is. I can't really get a bead on it, however. Chances are, the other oversold indicators need to give solid buys before the bounce materializes. That suggests to me that the market will take out the recent lows in one big rush, and then experience a healthy, high volume reversal. Thereafter, we would expect a 1-5 day rally.
The ongoing crisis in confidence in corporate governance may be having a much deeper effect than many realize. The average investor hasn't been having much fun for the past two years, and now he finds out that he's getting even less for his money when he buys stocks (e.g. Tyco and Enron). It's quite possible that Joe Six-Pack may decide that there are other, better, uses for his money than leaving it in the stock market. With mutual fund cash levels as low as they are, this could put a real cap on the market.
 
We have to love our shorts, at this juncture.
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Technical Review:
Coppock Breadth Indicator:  Sell. The CBI was down 0.1 to 190.2, 0.3 beneath the exponential. 
ITBM: Negative. Confirmed.
Seasonal: Positive
VIX: Pending Buy.
MACD: Negative.
Weekly MACD: Negative.
If you have questions, call us.
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Mark Young
Steward Analytics, Inc.
513-232-0700http://www.traders-talk.com/PFFT/instruct. html  http ://www.traders-talk.com