From: canslim-owner@xmission.com To: canslim-digest@xmission.com Subject: canslim Digest V1 #38 Reply-To: canslim@xmission.com Errors-To: canslim-owner@xmission.com Precedence: canslim Digest Sunday, 12 January 1997 Volume 01 : Number 038 In this issue: Re: [CANSLIM] Re: Jim Rogers Re: [CANSLIM] "M", overkill Re: [CANSLIM] "M", INLQ, RUDY Re: [CANSLIM] 1/10/97 market commentary [CANSLIM] Market indicators and their collective impact? Fw: [CANSLIM] Market indicators and their collective impact? Re: [CANSLIM] Stops [CANSLIM] Re: Losing streaks Re: [CANSLIM] Taking Profits [CANSLIM] Fw: Market Timing Model Using Historical Earnings Estimates See the end of the digest for information on subscribing to the canslim or canslim-digest mailing lists and on how to retrieve back issues. ---------------------------------------------------------------------- From: "tom worley" Date: Sat, 11 Jan 1997 08:43:51 -0500 Subject: Re: [CANSLIM] Re: Jim Rogers Either I missed the original post or this was snipped from something not posted to the group, but actually I consider myself rather introverted. I have never enjoyed crowds or large parties, pretty much always felt like an outsider in any organization, which may be why I developed a habit of speaking my mind even if I was in disagreement with the majority. If I seem extroverted in what I write, it is because I write about something I know and have confidence in what I say. That doesn't mean I am right, it just means that's OMHO. And often there are several equally valid opinions, the right one may only be determined over time. Then again, the dow did manage finally to close over 6600 this week, then, in a spectacular 150 plus pt reversal on "apparently" inflationary unemployment nrs and with the bond mkt down 1 and a half pts somehow run up to close over 6700 the same week. Confusing, you bet, stay tuned for this weekend's market comments attempting to make some sense of this past week. If anyone feels intimidated by my postings because it sounds like I know what I am saying, or because I have more experience than you, or a better background in the securities industry, then frankly that is your issue and you must find a way to resolve it. I don't flame anyone, at least not knowingly or intentionally. If you ask a question so basic that it is apparent you haven't read O'Neill's book, then I will suggest you go do your homework like most here already have. That's not a flame, at worst it is constructive criticism. I have said it before, and will continue to say it, everyone has an opinion, or should have. If you have no opinion it says to me you also don't have a plan, and without that you will be lost. Many of you have industry backgrounds or educations that can contribute to this group far more in specifics than I can. Don't be bashful, we all have different strengths and weaknesses, that's why a group working together can accomplish far more than the sum of the individuals. If the content or quality of my postings or my experience have contributed to intimidating anyone, please understand that is not my intent. I post to share with others what I have learned in hopes of helping you make better decisions in the market. I have made major mistakes in the past, including riding two companies right into bankruptcy liquidation (one in six weeks after I bot it, a personal best for rapid loss). Believe me, this was an expensive lesson in corporate finance, and was part of the loss carryforward that I finally wiped out in 96. I also don't have all the answers, even if you think so. Sometimes I know where to find them, sometimes I just know who to call to get them. Sometimes I frankly just don't know. On the other hand, in a group this size, someone should be out there who can provide the answer so post your question. From what I have seen of this group's background so far, one area that could be contributed greatly and has been done very minimally is in understanding a company's product competitiveness over another company's. We've got an impressive array of people here in terms of who they work for. While some may be limited by their employer in what they can say about their own products or work/research in progress, I suspect they know a lot about what the competition is doing and could share this legally and without sanction. This would be very important if any of us are considering buying into one of those companies. In my case, I am very limited in what I can say about specific companies. You may have noticed that when I talk of a specific company, I try to limit it to factual info without expressing an opinion. When I make more generalized comments, like about the market, I can mix in my opinion with facts, but I try to show clearly just what is my opinion. But that won't stop me having an opinion, or expressing it. tom w - ---------- > From: David F. Cameron > To: canslim@xmission.com > Subject: [CANSLIM] Re: Jim Rogers > Date: Friday, January 10, 1997 8:04 AM > > > I find it a bit overwhelming (most people in the group would say > > overpowering) > > TW > seems to fit the analytical extrovert role - and many find that > overwhelming given it is combined with a lot of experience. > ------------------------------ From: "tom worley" Date: Sat, 11 Jan 1997 08:53:12 -0500 Subject: Re: [CANSLIM] "M", overkill David, just a simple "Yeah, I agree" is better than silence cuz it lets me know that one other investor may be seeing some of the same things. While this helps reinforce my thinking, my posting may have already contributed to reinforcing yours. I am concerned over the drop in the size of the group. Jeff, Jeff where are you? Jeff Salisbury, time for another Lurker Poster update on this group. Speaking of which, haven't seen Mike Langston here for some time, was he one of the "missing 60" members? Disagreement is fine and often leads to discussion where we all learn, but concurrence still contributes. tom w - ---------- > From: David F. Cameron > To: canslim@xmission.com > Subject: Re: [CANSLIM] "M", overkill > Date: Friday, January 10, 1997 7:52 AM > > ... I agree wholeheartedly, I didn't post because I have nothing to add > I don't think we still have200 people though. I requested > the canslim-list from the majordomo and only got 140 names I usually > just pipe in if I have a question or disagree ------------------------------ From: "tom worley" Date: Sat, 11 Jan 1997 09:25:13 -0500 Subject: Re: [CANSLIM] "M", INLQ, RUDY OK, finally found the snipped posting that David responded to, guess I was overwhelmed last night by a long week and the late hours and the volume of email. Keep it coming tho, I like it. Much better than logging on to find two or three msgs waiting. Dean, thanks for the kind words, I do appreciate them because it is important to me to know that I am helping. As I mentioned in the past, discovering the internet has been therapy for me since my wife died. But even before that, which is why I continue to work in the securities industry, I have enjoyed sharing what I have learned. That frankly was the best part of being a broker, which contributed to why my production was so low (too much service, not enough sales). I'm glad you took the risk and responded with an opinion, that's how we get a discussion going and learn to examine our own thinking. Unlike my usual style, I'm imbedding my responses in the snipped comments below. Hope it makes some sense. tom w - ---------- > From: Dean Edwards > To: canslim@xmission.com > Subject: Re: [CANSLIM] "M", INLQ, RUDY > Date: Friday, January 10, 1997 7:32 AM > > starting to get apprehensive. Here is my observations about the market. > The top 100 stocks in dollar value for volume turnover have been lead by > technology which you have already mentioned in your earlier market > summaries. Please notice Professor, the student hasn't fallen asleep in > class :). I have been following some of these market leaders. And they are > not performing. What you may have forgotten is my comment in mid-Dec about the rotation of money out of the large cap stocks into the secondarys. This process was subsequently halted, but I believe has resumed. This opinion is reinforced both by NASDAQ performance measured again the dow 30 (neutral is about a 1:5 ratio, NASDAQ has been doing better than that) as well as by the Russell 2000 (just hit its first new high since May). > Then I came across a web-site which indicated the margin level in 1996 (for > the entire stock market) had surpassed the previous high set in 1987. The > alarm bells sounded went I read that, Margin levels concerns me as well. Several years ago, with savings acct rates around 2% and credit card charges still in the 18 to 21% level, the public got fed up and starting saving and paying off credit card balances. Now they seem to have gotten used to this interest rate spread. More money has come into the market because the returns are better than a savings acct. On the other hand, more people are more secure in their job status so are more comfortable in carrying greater debt. Balanced against this is that the number of personal bankruptcies continues to rise making new records every month (which is one reason credit card rates are so high). As far as securities accts go, when the mkt shows signs of a major run up (and the "January" effect is pretty predictable), margining to the hilt for max leverage of capital is a given. If this was happening in the fall, preceding the predictable "tax related selling" period, I would be more concerned. Right now, margin levels are a problem only if the mkt reverses significantly, otherwise it is contributing to capital creation. But if there is a reversal, watch out for the next three days or so as investors have to meet their margin calls, and can only sell in a time of weakness to do so. > seams to me, like we are in the last stages of a bull with these "euphoric > swings" in the indexes. In his book "How to Make Money in Stocks" Williams > O'Neil discusses the end of a business cycle. What stage of the business > cycle do you > think we are in? Are my fears all nonsense. I am starting to think about > cashing in, on some of my paper profits. So what do other people think? > A consensus of opinion on the "M" market conditions will help me formulate > an opinion. Are people using or coming off margin? I have always tried to keep my margin levels (equity percent) at 50% or better to avoid calls and give me some fast buying power when I needed it without selling something in a hurry. I have been increasing my margin lately (two weeks ago I was at 80 plus percent, currently I am around 60 percent). On the other hand, this "aging bull" has been in its "final stage" for about two years now, judging from market commentators. I have said this before, this bull can't be casually compared to historical norms. Thus far, it is proving itself to be unique. Even the ultra conservative investors are being forced into mutual funds as a minimum, CD rates are just too low for them. Money continues to flow into both the bond and stock mkt at historically unheard of rates. > If your last couple of trades have been unsucessful - the market > is telling you something. I have heard people discuss their losses on a > stock but never once mention "M" with regard to the loss. Don't assume the market is at fault, maybe the investor misread the signals, or mistimed the investment. However, it would be useful to all of us, including especially the one who lost the bucks, to bring these forth here and discuss them. That's how we all learn to make better decisions. > > Finally let me say that I prefer to be a lurker. As I said right from the > start, I > consider myself a novice and don't have that much to contribute. To which I again say B___S__T!!! This posting proves me right. > But Tom you spurred me into action! > I don't want to lose your market comments. Please send it to my personal > email address I am updating the address book this weekend before preparing a summary for the week. You'll be on the list. Thanks again for responding. > > > > ------------------------------ From: "tom worley" Date: Sat, 11 Jan 1997 09:43:34 -0500 Subject: Re: [CANSLIM] 1/10/97 market commentary Thanks for the competition, Luke, this is what I wanted to see here. Again, I am going to imbed my comments within your posting. I hope this is easier to read, feedback welcome. tom w - ---------- > From: lukelang@svlhp8.scs.philips.com > To: CANSLIM group > Subject: [CANSLIM] 1/10/97 market commentary > Date: Friday, January 10, 1997 9:00 PM > > I am going to try to give Tom some competition, as well as some > motivation to continue his excellent commentary work. > > This market is amazing. It seems like nothing can hurt it. Or > are we near the top? Bond takes a tumble on stronger than expected > employment number, but Dow and NASDAQ continues to march into > record territory (and finish at the high of the day). SOX > (Philadelphia semi index) is also at a near-term high. Early in > the morning I recall seeing NYSE advance/decline ratio around 1:8. > But both NYSE and NASDAQ a/d ration closed even. The really amazing > thing is the up/down volume ratio was 2:1 for NYSE and 3:2 for NASDAQ. No question, Friday was impressive. Major reversal, triggered the circuit breaker in both directions. Over a 150 pt swing on dow 30. Energy stocks again a major contributor. But close analysis of the employment nrs shows that while there were more jobs, almost all the gains were service, which tends to be low wages. And the hourly wage increase was minimal, 6cents I believe. That's why the report was not inflationary. The bond mkt did bounce off its lows but still down over a pt. Have we disconnected, at least temporarily, between the stock and bond mkt? I think the major factor is that Q4 earnings report cycle is upon us with virtually no negative "preannouncements". That's a good sign. What really surprised me is Motorola announcing neg earnings surprise and ending up gaining 2.5 pts! Go figure! Says something about the perception on the comms industry. Any group members out there with a background that want to share??? > > It sure looks like there isn't much inflation worries; ... I am still worried about rising > bond yield. Therefore, my strategy is put my finger on the sell > trigger ...One thing that sticks in my mind from last > summer's correction is dramatic shift in NYSE new high vs. new low > numbers. I too am watching the new high/low nrs and trying to gauge the extent of the "delayed reaction" if they reverse, so far I like the trend, esp on NASDAQ. > > I think semiconductors is the place to be right now. Even a lower than > expected book-to-bill can't bring them down. Nov's report was much stronger than anticipated, and while Dec slipped slightly I suspect it was still ahead of what had been anticipated back in Oct/Nov, so appears still bullish. Obviously, as long as it stays well over 1.0 and we don't see an inventory glut, it bodes well for the future. I think the expectation is > that the worst is over. For aggressive investors, I would recommend > betting on earnings. You almost can't loose. Good earnings bring rich > reward: VTSS and DS each gained almost 10% today I'm still kicking myself over missing VTSS last summer, and I was watching it daily, just didn't have the money or guts to jump in. > Have a nice weekend, > Luke Lang > > discussion on the psychology of a CANSLIM investor. Any comments? I for one am a risk taker, and think that most successful CANSLIM investors are likewise. To buy a stock at a new high, and play it into the unknown, usually without any dividends, requires taking a risk. tom w ------------------------------ From: OWENTIME@delphi.com Date: Sat, 11 Jan 1997 13:22:26 -0500 (EST) Subject: [CANSLIM] Market indicators and their collective impact? ================================= To: Dean Edwards ================================= RE: J. Rogers ..."just made a ton of money investing in natural resources for 1996. Again just from reading or observing the market, Mutual Funds in naturalresources had a great year. One fund in particular Fidelity made 38% for 1996. ================================= Warren Kent: Is this guy completely out of high technology? I heard he long ago washed his hands of this current hi-tech market attitude. BTW, What is the change this year in Fidelity Fund Mgrs. market buy? ================================= ... Rail stocks were doing very well towards the end of 1996. The market indexes are breaking records, that leap frog each other." ================================= Warren Kent: Rails up, and upward metal movement? Aluminum and copper really breaking out from 200 day downswings? Is this THE beginning bear indicator? I heard the "R" word expected from one CEO the other day. On the other hand, the diversity of this market is tough to read. I'm not averse to superstition and numerology when citing Hirsch's (7) in 1997 as a haunted stock market year; the triple witching year? ================================= Dean Edwards: O'Neil discusses the end of a business cycle. What stage of the business cycle do you think we are in? Are my fears all nonsense? ======== Warren Kent: Isn't the food sector and utilities turning up a classic O'Neill signal of money shift from high growth to safe stocks? McDonalds is not doing very well this year. Pepsi restaurants are not doing all that well. I think it was pizza hut with some reduced sales. I'm interested in the utilities though, my hunch is that some may do better than people think this year: mixed year from June on? ================================= Dave Cameron: The strong performance today, including seeing the > Russell 2000 hit its first high since May, is significant (anybody else besides me notice that), reinforces my opinion on what is happening, and... ================================= Warren Kent: I just wonder how much hype and eps will be put upon those in the Russell 2000. Will the "limbo bar" be quickly over adjusted for a bum 2nd quarter? Views? 2nd quarter performancee better than expected, with or without correction? ================================= Luke Lang: " SOX (Philadelphia semi index) is also at a near-term high." ================================= Warren Kent: Am puzzled by SOX near term high in such a volatile mkt. I thought all sensible D-RAM semi-conductor stocks were at their peak before Dec. Views? Seems like bad timing to get in now here? ================================= EARNINGS REPORTS: Does anyone have an efficient way of accurately getting good information on earnings reports well in advance? ------------------------------ From: "Dean Edwards" Date: Sun, 12 Jan 1997 13:25:10 +1300 Subject: Fw: [CANSLIM] Market indicators and their collective impact? I will try to answer some of your questions as best I can: > Warren Kent: Is this guy completely out of high technology? > I heard he long ago washed his hands of this current > hi-tech market attitude. I try to keep tabs on Jim Rogers. He writes a column for Worth magazine. He is bearish on the US stock market and thinks it is headed for a fall. I beleive he has been investing in the overseas stock markets. You have to remember he is an Under-Value Investor. I doubt if he would be investing in the high-tech sector. He only invests in industries or companies that have usually been in a major slump/turnaround. He considers the US stock market as a whole overpriced and that overseas markets based on fundamentals are far cheaper. > BTW, What is the change this > year in Fidelity Fund Mgrs. market buy? On the mutual funds, you will have to dig out the information for yourself. Natural resources was ranked number one for the year and this is where I obtained part of my source of information. http://www.stocksmart.com/ows-bin/owa/mF.g > Rails up, and upward metal movement? Aluminum and copper really > breaking out from 200 day downswings? Is this THE > beginning bear indicator? I heard the "R" word expected > from one CEO the other day. I don't know enough to answer that question or have an opinion. > On the other hand, the diversity of this market is tough to read. > I'm not averse to superstition and numerology when citing > Hirsch's (7) in 1997 as a haunted stock market year; the > triple witching year? Persoanlly I don't believe in superstition, numerology and astrology etc. to guide me in the stock market. But on the other side of the coin, if enough people believe it, then it is a self fulfilling prophecy. Take for example the 13th of Friday or Black Friday that is suppose to be an omen in Western culture. It pays to be aware of these things. I believe the Chinese consider the number 8 a lucky number and it is suppose to bring good fortune or is it the number 9? So I wouldn't be shorting their stock market in the year 1998 or 1999, because you would expect the market to be bullish that year and stocks to boom in price! > Isn't the food sector and utilities turning up a classic O'Neill > signal of money shift from high growth to safe stocks? McDonalds is > not doing very well this year. Pepsi restaurants are not doing > all that well. I think it was pizza hut with some reduced sales. > I'm interested in the utilities though, my hunch is that some may > do better than people think this year: mixed year from June on? Yes food and utilities are classic defensive stocks. I read a report that the restaurant industry used to be in the double digits for growth. But now this industry is slowing down into the single digits. Investor Peter Lynch believes one day it will be a non growth industry and I am in agreement with his analysis. That the restaurant market is slowly getting saturated, to the point where it will only grow as fast as the US Gross Domestic Product. But this doesn't mean you still won't find those fast-growers within that industry. Just as the women's clothing fashion industry is forever changing with time, restaurants are dropped and new ones come into prominence. As I understand it, there has been a shift away from the baby-boomer fast food outlets to the more family type orientated restaurants. McDonalds and Pizza Hut are not exactly wholesome food for a young family. Steak houses seem to be the rage or is it fad at the moment? It would be interesting to speculate what type of restaurant the ageing population in the US will be dining at, in the 21st century!? Will they be buying cheap take-away food or living longer with plenty of money and splashing out at an up market restaurant? It is a statistical fact that richer people live longer than poorer people. I wouldn't know anything thing about utilities or what is happening in that sector. I have found the US stock market just to gigantic to keep tabs on everything. But a pooling of resources like this CANSLIM forum helps. ------------------------------ From: charles bumpass Date: Sat, 11 Jan 1997 20:17:10 -0600 Subject: Re: [CANSLIM] Stops Thanks for the advice Nick... I have been making terrible decisions lately. I has been awful since when ever Greenspan made his speech. I have been stopped out at the market low only to see the stock rise back up the same day. I may just be getting sloppy. I have done best when following CANSLIM. So I went back to it this week. I chose AFCX... EPS 96 RS: 94 %Ann. Grow. :+52% %Qtr Eps Chg:+50% up Technical conditions: Just broke out of 1 year cup on 12/19. It went sideways for awhile then Broke out again on New high with Good volume on 12/31/96. I Bought at 26 on 1/2/97. I entered a stop at 23. It went up at first..HI: 27 1/4. But again...wham...I loose. I was stopped out at 22 1/2. Any Ideas what happened to my pick? I feel it is because I bought while the stock was gapping up. I think it would be simular to an O'neil sell signal. p106. #31 "Sell on new price highs off a wide and loose, erratic chart price formation." >Nick wrote: > It will take you much longer than two months to get a handle on investing > regardless of the system you choose. Pick a system you are philosophically > and "stomachly" in agreement with. When y'all (I'm from Texas) get on a losing streak...What do you do? Keep trading? Call it quits for awhile? I'm thinking of cashing in and taking my lose and try again later this year. I have lost $2000.00 real money...not to mention I let $2000.00 paper profits slip away. I know that every lose in the beginning hurts more than later. And to make matters worse...the Dow keeps making new highs. As for as the M is concerned in Canslim, I am wondering too if we are near a top since the dow is going up, but the rest of the market does not seem to be keeping up. ------------------------------ From: "tom worley" Date: Sat, 11 Jan 1997 22:09:57 -0500 Subject: [CANSLIM] Re: Losing streaks Sorry to hear of the losses, Charles. Yes it can be most frustrating when you do your homework, think you are making the right decisions, and still lose money. The market can be a very humbling place. I have never had all my portfolio in CANSLIM stocks, I personally have always had a bent for value plays, esp the microcaps, so typically hold several and watch many more. Right now, between my IRA and my trading acct, I have one NYSE, one CANSLIM, and three micros. The CANSLIM is only half of the position I intend to have, bot it as it broke new highs, then it pulled back a little. Am waiting, will either sell for small loss or add to the position after it tells me what it intends to do. I am looking for another CANSLIM to add next week, but no decision yet. As I have said before, to understand "M" you must look beyond the indexes and the large cap stocks. You must also weigh the underlying causes of the January effect. I have had losing streaks that lasted most of a year. The important thing to remember is that each trade is different, don't do one to make up for a prior loss. Also don't start thinking that you have to make up all the loss on the next one. Sometimes, just selling one for a profit is necessary to rebuild confidence without worrying about whether it may go higher still. Don't look back. tom w - ---------- > From: charles bumpass > To: canslim@xmission.com > Subject: Re: [CANSLIM] Stops > Date: Saturday, January 11, 1997 9:17 PM > > I have been making terrible decisions lately. I has been awful since > when ever > Greenspan made his speech. I have been stopped out at the market low > only to > see the stock rise back up the same day. I may just be getting sloppy. > > I have done best when following CANSLIM. So I went back to it this > week > I Bought at 26 on 1/2/97. > I entered a stop at 23. > > It went up at first..HI: 27 1/4. But again...wham...I loose. > I was stopped out at 22 1/2. > > Any Ideas what happened to my pick? I feel it is because I bought while > the stock > was gapping up. I think it would be simular to an O'neil sell signal. > p106. #31 > "Sell on new price highs off a wide and loose, erratic chart price > formation." > When y'all (I'm from Texas) get on a losing streak...What do you do? > Keep trading? > Call it quits for awhile? > As for as the M is concerned in Canslim, I am wondering too if we are > near a top > since the dow is going up, but the rest of the market does not seem to > be > keeping up. ------------------------------ From: Johan Van Houtven Date: Sun, 12 Jan 1997 13:22:57 +0100 Subject: Re: [CANSLIM] Taking Profits 40% up now? I 1 week, 1 month, 1 year, 1 decenium? If it is less that 1 year I would not wait for the earnings, unless I was pretty sure about what they would be. You might want to ask yourself this question: Why take the risk? >On Fri, 10 Jan 1997 19:33:43 -0600 Chris Beauregard >writes: >>I have a question regarding the previous comments regarding the >>missing >>earnings estimates. Considering the this and what appears to be an >>increased volatility of the market, would it be wiser to sell one of >>my >>stocks (that is currently up 40%) prior to next week's earnings >>annoucement or to wait. This may not be enough specific information >>to >>go on, but I am mainly looking for a general strategy. >> > > ------------------------------ From: "tom worley" Date: Sun, 12 Jan 1997 08:51:35 -0500 Subject: [CANSLIM] Fw: Market Timing Model Using Historical Earnings Estimates Oh no, someone else besides me believes in this "aging bull"!!! Hate it when the thinking starts going bullish. Oh well. Thought everyone would gain from this item as it presents another viewpoint to valuation, in this case a general measure of the stock vs the bond mkt. In addition, this website also offers historical earnings data which may be a good resource tool. I haven't checked out the site yet, but will do so later. tom w - ---------- > From: Edward E. Murphy > Newsgroups: misc.invest.stocks > Subject: Market Timing Model Using Historical Earnings Estimates > Date: Wednesday, January 08, 1997 4:53 PM > > I'm bringing a market-timing model to the attention of this newsgroup > because I want to generate some interest in the idea of historical > earnings estimates with a constant time horizon. Charts of constant time > horizon historical earnings estimates are available only at MarketPlayer's > website (http://www.marketplayer.com). > > Paradigm Investment Services, the parent company of MarketPlayer, sells a > sector selection product to institutional equity managers focusing on the > U.S. equities market. One part of the product is a market timing model > based on the equity earnings yield in the U.S. stock market vs the yields > of U.S. bonds. > > Stock Yield greater than (>) Bond Yield -> Buy Stocks > Bond Yield greater than (>) Stock Yield -> Buy Bonds > > This model is purely driven by this single valuation idea (relative > yield), no momentum or technical factors. > > Our model has been correct in 6 out of the 7 Sell signals generated over > the last 30 years. Its currently posting a Buy signal, as it has been > since June of 1992. Here are all the signals over the last 30 years > (first Sell signal was 10/69): > > Sell Sell Buy Buy # %Price > Date Price Date Price Months Return > > 10/69 97.24 06/70 77.72 8 -20.1% > 07/73 108.22 11/73 95.96 4 -11.3% > 11/80 140.52 11/81 126.35 12 -10.1% > 08/83 164.44 02/84 157.06 5 -4.5% > 06/87 304.00 11/87 230.30 5 -24.2% > 05/90 361.23 09/90 306.05 4 -15.3% > 05/91 389.83 06/92 408.14 13 +4.7% > Still a Buy Signal - Current SP500 price: $748 > > If you've screwed around with long term market timing models, you know > this is pretty unique. Particularly because this valuation model still > has a Buy signal, and its based on single very simple relative valuation > factor. > > Why does this model still work, while the other valuation driven market > timing models have failed to stick with this massive bull market? Mainly > because the other timing models use reported earnings to derive their > historical E/P yield, and that's unfortunately proven worthless. You have > to use bottom-up aggregated earnings estimates. > > Here are the three tricks behind the success to this simple model: > > 1. We use bottom up aggregated historical earnings estimates with a > constant time horizon of six (6) months for our stock earnings yield after > 12/78. Prior to that period, we use trailing reported earnings from > Standard and Poors. > > 2. We use the average of the 30 day US Treasury Bill and 3 Mo Treasury > Bond for the bond earnings yield. > > 3. The Sell Signal is generated when the stock earnings yield is 0.50% > lower than the bond yield. The Buy Signal is generated when the stock > earnings yield is 0.50% higher than the bond yield. This is a common > practice of establishing a Buy/Neutral/Sell oscillator range. > > Here's how the indicator shapes up as of today's close: > > S&P 500 Price: $748 > 6/97e EPS: $43.66 > Stock Yield: 5.84% > > US 30 Yr Bond Yield: 6.84% > US 91 Day T-Bill Yield: 5.14% > Average Treasury Yield: 5.99% > > Current Relative Yield: -0.15% > (Sell signal generated at -0.50%) > > For the chart showing all the Buy/Sell signals using this indicator, go > to: > > http://www.marketplayer.com/misc.invest.stocks/market-timing.html > > Ted Murphy > Paradigm Investment Services (dba MarketPlayer) > > **** Free Sponsored Access **** > For free sponsored access to the entire MarketPlayer website, including > charts of historical earnings estimates for 3,800 companies and over 100 > custom indices, register for MarketPlayer at > http://www.marketplayer.com/sponsor/investorama. > > invest-o-rama! is sponsoring the invest-o-rama! HedgeHog Competition > beginning Friday, Jan 17th at 4:00 pm EDT. > > ------------------------------ End of canslim Digest V1 #38 **************************** To subscribe to canslim Digest, send the command: subscribe canslim-digest in the body of a message to "majordomo@xmission.com". If you want to subscribe something other than the account the mail is coming from, such as a local redistribution list, then append that address to the "subscribe" command; for example, to subscribe "local-canslim": subscribe canslim-digest local-canslim@your.domain.net A non-digest (direct mail) version of this list is also available; to subscribe to that instead, replace all instances of "canslim-digest" in the commands above with "canslim". Back issues are available for anonymous FTP from ftp.xmission.com, in pub/lists/canslim/archive. These are organized by date.