From: owner-canslim-digest@lists.xmission.com (canslim-digest) To: canslim-digest@lists.xmission.com Subject: canslim-digest V2 #366 Reply-To: canslim Sender: owner-canslim-digest@lists.xmission.com Errors-To: owner-canslim-digest@lists.xmission.com Precedence: bulk X-No-Archive: yes canslim-digest Monday, August 24 1998 Volume 02 : Number 366 In this issue: [CANSLIM] Some random thoughts (noise) on "M" Re: [CANSLIM] Some random thoughts (noise) on "M" [CANSLIM] Long term stock picks Re: [CANSLIM] Some random thoughts (noise) on "M" Re: [CANSLIM] VIX (CBOE's Volatility Index) Re: [CANSLIM] VIX (CBOE's Volatility Index) Re: [CANSLIM] Follow-through days and Bollinger Bands (BB) [CANSLIM] "M" and Currency Noise Re: [CANSLIM] O'Neil's counting method - Johan [CANSLIM] International Markets Site - Wowser! Re: [CANSLIM] VIX (CBOE's Volatility Index) Re: [CANSLIM] VIX (CBOE's Volatility Index) [CANSLIM] Asian markets Re: [CANSLIM] RUT ---------------------------------------------------------------------- Date: Sun, 23 Aug 1998 08:55:11 -0400 From: "Tom Worley" Subject: [CANSLIM] Some random thoughts (noise) on "M" The Feds bias continues in favor of a rate hike more so than a cut. However, at least for the time being, and this could easily extend out 6 months, no change is the most likely scenario. New jobless claims fell again last week and the 4 week average is now at an 18 month low despite new workers entering the workforce from the welfare roles (where the new 2 year limit is running out on many). Thus it seems these new workers are being absorbed without displacing other marginal existing employees. The 30 year bond, thanks to "safe haven" buying, closed at all time record low, yielding 5.46% on the close and intraday as low as 5.43%. Interestingly, gold has not benefited from the safe haven flight, gaining only ten cents last week, suggesting that inflation is not a concern, tho some of this undoubtedly comes from many weak currencies including in both S. Africa and Australia, along with weak consumer damand from Asia. Oil futures fell again Friday, remaining near 10 year lows (wish we saw that at the pumps!) as the US inventory remained the highest since 1983. Despite the strong and respectable recovery from down nearly 300 points on Friday, the DGO charts show the overbot/sold on NYSE dropped to minus 436 and on Nasdaq to a minus 722. Many "leadership" European mkts had one of their worst days this year on Friday, France down 3.5%; Germany down 5.9% and Switzerland down 3.7%. The US intraday drop mimiced much of this, but the strong recovery left the US mkt as showing the best performance of any major mkt worldwide. All of the Latin American mkts had a terrible day, with Venezuela leading the way, down over 9%. That's over 18% in two days, and they were already setting new 12 month lows before that. Talk about "plummeting"! Venezuela is now down 60% just for this calendar year. For those that feel they are immune from foreign stocks because they only trade US stocks, but use volume figures on NYSE in their assessments, be aware of a "sleeper" factor. Many foreign stocks trade their ADRs on NYSE, and it can seriously warp the figures. As an example, Telebras (which just was privatized on 7/29) hit a 28 month low on Friday, down 29% just since the privatization. It is a "bellweather" stock for the LATAM mkts (e.g. a major leader), and along with several other LATAM ADRs, was a volume leader on NYSE to the downside on Friday and several preceding days. I know of no way to "back out" the volume of ADRs to get an assessment of the volume for just US stocks, maybe some of the stock screening programs can do this. Just as Russia swore they would not devalue the ruble, then floated it into an effective devaluation, Venezuela is promising there will be no devaluation of the Bolivar. However, the weakness in both the economy and the currency is already causing severe problems there and in Brazil and other LATAM countries. A devaluation by Venezuela will be more serious than what Russia did, as the bolivar is pegged to the US dollar. In addition, both Venezuela and Brazil have been forced to delay major debt offerings needed to cover govt deficits. While Russia has already effectively defaulted on some of its debt, speculation is that Venezuela has enough US dollar reserves to service its debt for some time. However, with much of LATAM debt being dollar denominated, they will be forced to sell local currency to buy dollars once the reserves are exhausted to service their debt. So a protracted crises, which appears to be happening, could send several important LATAM countries into default or bankruptcy. The recent strikes by the United States against terrorist targets so far does not appear to be likely to result in a disruption of oil supply, thus excess supply will continue. Control of the stock mkt by institutional managers was confirmed in a story I read this weekend. Seems over 60% of publicly traded shares are now under institutional management, compared to about 44% just a few years ago. Liquidity remains the first priority for them, as opposed to performance, earnings growth rate, etc. I see no reason to believe that the better earnings of small caps will result in better performance by the Russell 2000 compared to S&P500, Dow 30, etc. Tom W - - ------------------------------ Date: Sun, 23 Aug 1998 09:46:36 -0400 From: "Frank V. Wolynski" Subject: Re: [CANSLIM] Some random thoughts (noise) on "M" Thanks Tom for a most impressive 'Big Picture' economic view. If you don't mind, I have a couple of questions. At 08:55 8/23/98 -0400, you wrote: >The 30 year bond, thanks to "safe haven" buying, closed at all time >record low, yielding 5.46% on the close and intraday as low as 5.43%. >Interestingly, gold has not benefited from the safe haven flight, >gaining only ten cents last week, suggesting that inflation is not a >concern, tho some of this undoubtedly comes from many weak currencies >including in both S. Africa and Australia, along with weak consumer >damand from Asia. > Do you feel the current trend in the long bond is liking to remain for the immediate future? What would it take to reverse the situation in the trend? >Despite the strong and respectable recovery from down nearly 300 >points on Friday, the DGO charts show the overbot/sold on NYSE dropped >to minus 436 and on Nasdaq to a minus 722. > I don't have a reference to indicate what the -436 and -722 figures mean. What is the significance of the numbers? >Just as Russia swore they would not devalue the ruble, then floated it >into an effective devaluation, Venezuela is promising there will be no >devaluation of the Bolivar. However, the weakness in both the economy >and the currency is already causing severe problems there and in >Brazil and other LATAM countries. A devaluation by Venezuela will be >more serious than what Russia did, as the bolivar is pegged to the US >dollar. In addition, both Venezuela and Brazil have been forced to >delay major debt offerings needed to cover govt deficits. While Russia >has already effectively defaulted on some of its debt, speculation is >that Venezuela has enough US dollar reserves to service its debt for >some time. However, with much of LATAM debt being dollar denominated, >they will be forced to sell local currency to buy dollars once the >reserves are exhausted to service their debt. So a protracted crises, >which appears to be happening, could send several important LATAM >countries into default or bankruptcy. > Not to mention Canada. I was looking at a chart of the Canadian dollar this morning and it is basically in a free fall. Perhaps Walter can give us some insight into what the scuttlebut is? Thanks again, Frank Wolynski - - ------------------------------ Date: Sun, 23 Aug 1998 08:23:49 -0600 From: "Dan Sutton" Subject: [CANSLIM] Long term stock picks I ran another TELESCAN search last night looking for stock candidates that have performed similar to DELL. The primary criteria I used was for the stock price to have appreciated more than 30% annually for the last three years as well as the last five years, earnings growth over the last year needed more than 20%, the annualized five year projected EPS increase needed to be more than 20%, and EPS stability had to be ranked higher than 90 (TELESCAN numbers). The search returned about 50 or 60 stocks over each of the past three year periods. Approximately 1/2 of the candidates returned in each of the test periods crashed and burned sometime during the next 12 months. I still need to see if I can find any early signals in the TELESCAN data that would signal a poor candidate. After running a current scan, I downloaded the charts and ran through them quickly, only looking for (in my opinion) a consistent upward pattern...not necessarily a trading signal. This eliminated more than 50 potential candidates. Following are the strongest candidates from this particular scan: DY WLA STLY RHI PAYX DELL DV ASGN MSFT SPLS KSS WPI EMC JKHY SBL These are sorted (highest to lowest) using an EXCEL formula I plugged in projecting next years potential stock price. If I were to begin looking for purchase candidates, I would plug these into a watch list and buy them when they trip my particular trading signals. Many of these have been CANSLIM candidates at one time, but I have not yet looked up the criteria to see where they stack up right now. What do you think? Oh by the way, I already own 4 on the list (not that it matters). - - ------------------------------ Date: Sun, 23 Aug 1998 11:20:56 -0400 From: "Tom Worley" Subject: Re: [CANSLIM] Some random thoughts (noise) on "M" On the 30 year bond: A rate hike would only make this more attractive (higher yield). With the US economy one of the best in the world, and the US dollar one of the strongest currencies, unlikely that the US Treasury mkt will fall out of favor short of a recession in the US or a surprising recovery in the economy of another major power's mkt. Worth noting that the USA, thanks to a economic process that now has the govt showing a budget surplus vice deficit, is now issuing less paper, thus drying up supply just as demand is increasing. Don't think this is happening anywhere else in the world. Without being able to see a DGO chart, it's hard to qualify these numbers other than to say that the chart essentially goes to a -600+, thus the Nasdaq nrs are already once again "off the chart". I think this same chart is used in IBD, so you could look at it there to get a better handle. On Canada, like several other nations, intervention has been employed in an attempt to stabilize the currency/market. Just as with Japan, currency intervention is a shortcut to bankruptcy if the underlying economic causes of the weak currency are not fixed first. Worth noting what Hong Kong did, rather than worrying about currency, they instead concentrated on buying their "blue chip" stocks on the open mkt. Too early to tell if it's working, tho did stabilize their mkt for the three days they did this. I suspect it may be a better "investment" than buying the currency. Japan has been doing a lot of talking about intervention on behalf of the yen, which has succeeded in backing off the traders, but the last two days of trading suggests that this threat is once again losing its effect, and the yen is once again falling against the dollar and mark. Intervention is just not a good investment unless the currency being bot is truly oversold, and without some cure to the Japanese economic system, the yen if anything is overvalued now. I suspect the Canadian dollar is being additionally hurt by the Japanese shipping in merchandise to Canada, then moving it down to the USA under the Trade agreements, so the trade deficit shows up against Canada rather than Japan. This is a political issue, I suspect well known to the three govts involved, and won't be resolved without political action. I suspect Canada is deriving at least some short term benefit, or else they wouldn't tolerate such "back door" economics. Tom W - -----Original Message----- From: Frank V. Wolynski To: canslim@lists.xmission.com Date: Sunday, August 23, 1998 9:46 AM Subject: Re: [CANSLIM] Some random thoughts (noise) on "M" >Thanks Tom for a most impressive 'Big Picture' economic view. > >If you don't mind, I have a couple of questions. > >At 08:55 8/23/98 -0400, you wrote: >>The 30 year bond, thanks to "safe haven" buying, closed at all time >>record low, yielding 5.46% on the close and intraday as low as 5.43%. >>Interestingly, gold has not benefited from the safe haven flight, >>gaining only ten cents last week, suggesting that inflation is not a >>concern, tho some of this undoubtedly comes from many weak currencies >>including in both S. Africa and Australia, along with weak consumer >>damand from Asia. >> > >Do you feel the current trend in the long bond is liking to remain for the >immediate future? What would it take to reverse the situation in the trend? > >>Despite the strong and respectable recovery from down nearly 300 >>points on Friday, the DGO charts show the overbot/sold on NYSE dropped >>to minus 436 and on Nasdaq to a minus 722. >> > >I don't have a reference to indicate what the -436 and -722 figures mean. >What is the significance of the numbers? > >>Just as Russia swore they would not devalue the ruble, then floated it >>into an effective devaluation, Venezuela is promising there will be no >>devaluation of the Bolivar. However, the weakness in both the economy >>and the currency is already causing severe problems there and in >>Brazil and other LATAM countries. A devaluation by Venezuela will be >>more serious than what Russia did, as the bolivar is pegged to the US >>dollar. In addition, both Venezuela and Brazil have been forced to >>delay major debt offerings needed to cover govt deficits. While Russia >>has already effectively defaulted on some of its debt, speculation is >>that Venezuela has enough US dollar reserves to service its debt for >>some time. However, with much of LATAM debt being dollar denominated, >>they will be forced to sell local currency to buy dollars once the >>reserves are exhausted to service their debt. So a protracted crises, >>which appears to be happening, could send several important LATAM >>countries into default or bankruptcy. >> > >Not to mention Canada. I was looking at a chart of the Canadian dollar this >morning and it is basically in a free fall. Perhaps Walter can give us some >insight into what the scuttlebut is? > >Thanks again, > >Frank Wolynski > > > >- > - - ------------------------------ Date: Sun, 23 Aug 1998 08:54:34 -0700 From: Dan Cash Subject: Re: [CANSLIM] VIX (CBOE's Volatility Index) Hi Tom, The VIX is new info to me Tom Worley wrote: > I thought of a new wrinkle on my system this morning. I have found > that VIX (the CBOE Volatility Index) has been historically a good > indicator of a favorable/unfavorable climate for CANSLIM type stocks. Do you think it applies to non CANSLIM as well? > Generally, if VIX is under 20 (low volatility), it's a favorable Is this what you have found, or is this the general consensus of interpretation? Do you know how it is calculated? Or where I can read about and save you the labor? > > > > > > climate. Unfortunately, I haven't been paying as much attention as I > used to, or should have been. > > This morning, I took a look at the 1 year, 6, 3 and 1 month charts of > VIX using MACD on the bottom at BigCharts with my usual settings. I > noted two important (to me) details. First, had I thought of using > this back then, I would have noted that VIX earlier this year when I > was making some nice money was still tracking around 21-23. A > cautionary sign (since it was over 20), had I been looking. MACD at > the time was negative (a positive in this context) so wouldn't have Why is a negative MACD a positive in this context? And is negative above the 0 line or red below blue? > > > > been chased out, but would/should have tightened my tolerance. > > Second, MACD quite clearly shows that I should have exited CANSLIM > type stocks on July 21 or 22, when MACD went positive (bad thing in > this context). As I recall, that wouldn't have been a bad exit point. Would you have exited last of March, April, May? June? Knowing what I know today I would probably (?) have been out of the market sometime between the 9th and the 17th. I have been reading Elder's "Trading For A Living". He puts a great deal of emphasis on the MACD-Histogram which he defines as: MACD line minus Signal line. "The slope... is defined by the relationship between any two neighboring bars. If the last bar is higher... the slope is up... etc." He says it shows the difference between long-term and short-term consensus of value. That "the slope... identifies the dominant market group." And "when the slope... moves in the same direction as prices, the trend is safe." That "the best sell signals are given when... (it) is above its centerline but its slope turns down showing that bulls have become exhausted." So I have been trying to learn to interpret this. I have been looking at two indices on a daily basis, the NYSE and the Nasdaq. And my above statement of being out is primarily based on the former. The MACD-Histogram reached a peak on the 8th and made a significant reversal the next day. It made a minor attempt to reverse on the 14th and the 16th, and from that point it was down. Now couple that with a SICK advance-decline line, (both divergent to the index), I should have bailed. Now the slope has been rising since the 8th, to above the 0 line (barely) and as I read Elder, this presents itself as an opportunity to sell holdings or short. Looking at the chart of the NYSE, I do not see any reason why it will not go to 515 to 500. If the A-D Line weren't so one directional, but its slope is so unambiguous. The Nasdaq is even less ambiguous. MACD-Histogram reversed with a vengeance on the 2nd, the A-D Line was flat, and now so sharply down that it could pop gum off a hot sidewalk. And if it goes through 1751 there is nothing to keep it from going to 1650, it seems to me. Why not? It is sicker (or in a healthier decline) than the NYSE. > > > > > It looks like MACD is about to go negative again, however VIX is still > at 30, well over 20, thus the mkts would appear to need to do a lot of > calming before the environment will again become favorable to > CANSLIMers. So coupling the VIX with the above it is all quite interesting to me. Just some thoughts I wanted to share with you. I had made a comment about the MACD-Histogram to Tannis, only to get shot down by db as he seems to think of it only as a short term (daily) indicator. I do not see it that way at all. It will be interesting to me if I can use it as a market indicator to buy. Pet the kitties, Dan > > > > > Tom W > > - > > - - ------------------------------ Date: Sun, 23 Aug 1998 10:29:03 -0700 From: Dan Cash Subject: Re: [CANSLIM] VIX (CBOE's Volatility Index) Seems that I am becoming proficient at inadvertence. My post to Tom was intended to him. Anyone's comment welcome. - - ------------------------------ Date: Sun, 23 Aug 1998 18:25:05 GMT From: musicant@autobahn.org (Dan Musicant) Subject: Re: [CANSLIM] Follow-through days and Bollinger Bands (BB) On Sat, 22 Aug 1998 17:02:51 +0200, you wrote: :Can anyone verify that in order to maximise the chance that you have a :succesfull follow-through day,... :Johan Van Houtven / CLICK! N.V. : : In case it hasn't been mentioned (or sufficiently noticed!), there is an article authored by WON on A7 of Friday's IBD titled "How To Spot Market Tops And Bottoms". Nothing new here, I think, but reaffirms WON's satisfaction with the efficacy of his simple method which (he claims) is highly effective when others' far more complex methodologies prove virtually useless. I think I may have it memorized now, though I haven't taken to "counting days", as they say. I am quite aware of the concepts and when I see index figures and volume figures, up volume/down volume, new highs/new lows, etc. I can instinctively proclaim distribution. I do think, however, that counting days is a very good idea. Dan musicant@autobahn.org - - ------------------------------ Date: Sun, 23 Aug 98 14:59:31 PDT From: "Walter Stock" Subject: [CANSLIM] "M" and Currency Noise > Not to mention Canada. I was looking at a chart of the Canadian dollar = this > morning and it is basically in a free fall. Perhaps Walter can give us = some > insight into what the scuttlebut is? > Thanks again, > > Frank Wolynski Hi Frank, The ongoing Canadian currency disaster is why I moved all of our cash savings and all of my trading money into US dollars 12 months ago. Fortunately for me and my family, this move has made us money. The Canadian one-dollar coin has an engraving of the Loon bird on the reverse. As a result virtually all Canadians affectionately call our dollar the "Loonie". We have, however, come across new and exciting reasons to call it the Loonie : The Canadian dollar has been in a long term decline against the US dollar. The damage has been accelerating in the last few years. One year ago last Friday, the Canadian dollar was trading at 73.03 cents = US. Today, it is trading at 64.84 cents US. Why has the Bank of Canada allowed it to fall so much? Well, the answer is our fragile economic recovery. The recovery from the last recession in Canada came later and was much weaker than in the US. For example we are still running well over 8% unemployment. So the Bank of Canada has been unwilling to raise interest rates to protect our dollar for fear that it would snuff out our economic recov= ery. Instead the Bank has tried intervention (buying up excess Canadian dollars) in the currency market. This has met with limited success in the short term, but it will inevitably fail over the long term unless some of our economic fundamentals change. Last week I had a long dinner with a friend who also happens to be the seniormost currency "person" at one of the "Big Six" Canadian banks. I am not able to divulge his title or name, so take this for what it is = worth : His view is that the Canadian dollar goes to 60 cents. Thereafter a trading range (next year at the earliest). Note that this is not what = the banks are saying publicly. However, please do NOT take this as a trading recommendation or a "hot tip" to short the Canadian buck. Just some noise from north of the border. Am I going to buy back Canadian dollars anytime soon? Well... just remember that the Loon is a diving bird.... Walter - - ------------------------------ Date: Sun, 23 Aug 98 15:10:19 PDT From: "Walter Stock" Subject: Re: [CANSLIM] O'Neil's counting method - Johan > Walter wrote: > > >Couple quick comments... > >(check the #2 point in his graph in mid-April ). > > Could someone please scan and post this chart? I'd love to 'see' what = he is > talking about. > > Alas we Europeans can't get IBD, otherwise I would have had a subscript= ion... > > Johan Van Houtven / CLICK! N.V. Hi Johan, If nobody in the group is able to scan in the graph, or otherwise get it = to you, let me know. I have cut it out and would be happy to fax it to you. Just send me a private e-mail with your fax number. Walter Stock Oakville, ONT - Canada e-mail: wstock@globalserve.net - - ------------------------------ Date: Sun, 23 Aug 1998 18:26:31 -0400 From: "Frank V. Wolynski" Subject: [CANSLIM] International Markets Site - Wowser! Mondays IBD had and article on page A8, 'Computers Made Plain', 'Web Offers Free Stock-Chart Data'. I thought 'yeah, like that's news -- NOT'. I read it anyway. Glad I did. One of the sites mentioned is J.P. Morgans offshore markets site. It compares globally and within industry groups. Nice graphics/stats that show the Indexes back a ways and not just the past few months as Yahoo currently has. Currency rates on the same screen as individual issues and the Indexes. Alot of 'Bang' for free and especially if you are interested in the International Markets. J.P. Morgan & Co. (Offshore Market Web Site) http://www.adr.com Other sites mentioned in the article: ICQ Inc. http://www.icq.com Concerto Technologies Inc. http://www.bigcharts.com Neural Applications Corp. http://www.stockpoint.com ClearStation Inc. http://www.clearstation.com Frank Wolynski - - ------------------------------ Date: Sun, 23 Aug 1998 18:58:03 -0800 From: "Patrick Wahl" Subject: Re: [CANSLIM] VIX (CBOE's Volatility Index) Date sent: Sun, 23 Aug 1998 08:54:34 -0700 From: Dan Cash > The VIX is new info to me Anyone know where to find historical VIX info on the internet? - - ------------------------------ Date: Sun, 23 Aug 1998 20:58:36 -0400 From: "Tom Worley" Subject: Re: [CANSLIM] VIX (CBOE's Volatility Index) Hi Dan I was educated on the VIX and its CANSLIM relationship here at this group by Mike Langston, another charter member and regular poster of past times. I will search thru my old email and see if I can find Mike's explanation of VIX and post it, or maybe Mike will jump in here and explain it more completely. All I really understand is that low volatility seems to generate a better climate for true CANSLIM style stocks. The division was reported as the 20 line, and my experience over the past several years supports this. I have never tried to apply it to other type stocks, so don't know what the relationship would be. Normally, you want MACD to be positive because you are looking for an increase in the price of a stock (or index). In the case of VIX, you are looking for a drop in the numerical value, preferably below 20, thus a neg MACD becomes a positive as it implies a lowering of the numerical value. As I am using MACD, negative is when the bargraph drops below zero (e.g. the red line at bigcharts goes under the blue line). I have not yet tried to use MACD in a "trend" mode as advocated by Elder (e.g. latest MACD is less negative than the prior day, thus a positive trend). I just use the zero line as a decision maker. Tom W - -----Original Message----- From: Dan Cash To: canslim@lists.xmission.com Date: Sunday, August 23, 1998 11:57 AM Subject: Re: [CANSLIM] VIX (CBOE's Volatility Index) >Hi Tom, > >The VIX is new info to me > >Tom Worley wrote: > > >> I thought of a new wrinkle on my system this morning. I have found >> that VIX (the CBOE Volatility Index) has been historically a good >> indicator of a favorable/unfavorable climate for CANSLIM type stocks. > >Do you think it applies to non CANSLIM as well? > >> Generally, if VIX is under 20 (low volatility), it's a favorable > >Is this what you have found, or is this the general consensus of >interpretation? >Do you know how it is calculated? Or where I can read about and save you >the labor? > >> >> climate. Unfortunately, I haven't been paying as much attention as I >> used to, or should have been. >> >> This morning, I took a look at the 1 year, 6, 3 and 1 month charts of >> VIX using MACD on the bottom at BigCharts with my usual settings. I >> noted two important (to me) details. First, had I thought of using >> this back then, I would have noted that VIX earlier this year when I >> was making some nice money was still tracking around 21-23. A >> cautionary sign (since it was over 20), had I been looking. MACD at >> the time was negative (a positive in this context) so wouldn't have > >Why is a negative MACD a positive in this context? And is negative above >the 0 line or red below blue? > >> been chased out, but would/should have tightened my tolerance. >> - - ------------------------------ Date: Sun, 23 Aug 1998 22:10:08 -0400 From: "Tom Worley" Subject: [CANSLIM] Asian markets Japan, after a brief rally attempt, is now solidly below 15,000, now down 2.67% at 14,889. The only significant Asian mkt showing any strength is S. Korea (remember my comments in the past on their potential to become the new "leader" in Asia??). Futures are not being hit as badly, but on this data would expect a down day in Europe at a minimum. Tom W - - ------------------------------ Date: Mon, 24 Aug 1998 12:06:52 -0700 (PDT) From: dbphoenix Subject: Re: [CANSLIM] RUT <> I don't see any big problem with it. One wouldn't use the internet index as an aid to deciding whether and when to enter airline stocks, so it makes sense to know exactly what the index one is following is actually saying. It pays to keep track of the DJIA, S&P500, OEX, NDX, RUT, NYSE, etc., if for no other reason than to spot divergences. Granted, it's useful to keep at least one eye on the broadest index available just so that one knows what the "market" is doing, and to remember that divergences don't last forever, in case one is considering jumping into an index which is going it alone on the upside. What's most important to me, however, is not to get spooked by what the DJIA or Naz did on a given day but to focus on what's happening with the particular stocks I happen to own. Also to remember that if the Dow were to fall 50%, that doesn't mean that every stock in the DJIA would be cut in half. Some would decline fractionally. Some might actually rise. Which is why it's difficult for me to believe that when O'N says to watch the market, he's referring to something more than the DJIA. As to whether this constitutes playing loose with O'N's ideas or not, I'd say, right off the bat, probably. However, since he's changed most of CS during the past year and is now recommending that everyone stick to large-cap growth stocks with ADVs in the millions, one might be forgiven for trying to adapt CS to current realities oneself since so little guidance has been provided by the powers that be at good ol' IBD U. One of the reasons I began to adopt and adapt some of the ideas tossed around the HGS forum was because I was having increasing difficulty getting CS to work in the current market environment. Not wanting to abandon it, I took what I thought made sense from HGS, applied it to CS, and made CS more current, at least for myself. One of the most valuable lessons I learned was to pay far more attention to moving averages and their various crossovers. If the purists have a problem with any of this, it's well to remember that they themselves go beyond CS in order to make decisions about their investing moves, whether it's to follow technical indicators such as the MACD, or to apply charting techniques espoused by individuals or groups outside IBD, or to use some index or economic indicator or whatever that isn't "regulation". Personally, I couldn't care less whether O'N "approves" of MACD or not. It's probably the most valuable technical indicator I use. And anyone who uses MACD and pooh-poohs moving-average crossovers ought to remember what MACD stands for. As far as I'm concerned, as long as you're following the basic CS philosophy, use whatever you please that helps you make better investment decisions. - --Db _________________________________________________________ DO YOU YAHOO!? Get your free @yahoo.com address at http://mail.yahoo.com - - ------------------------------ End of canslim-digest V2 #366 ***************************** To unsubscribe to canslim-digest, send an email to "majordomo@xmission.com" with "unsubscribe canslim-digest" in the body of the message. For information on digests or retrieving files and old messages send "help" to the same address. Do not use quotes in your message.