SAMPLE DAILY COMMENTARY

This page is a sample of the Daily Commentary that goes with the real time Commentary & System Trade Signals that is posted each day, and restricted to, paid subscribers. I have selected the time frame from January 16 to January 30 because it shows my reading on the markets as they topped, day by day, and how I protected profits of 18% for January 2004. The NASDAQ peaked on Jan 20 the S&P 500 on Jan 26.

Then you will see what I wrote day by day as the markets started to end their correction the middle of March, and then turned bullish the end of March and the beginning of April 2004. I suggest that you print this out and read it, from the bottom of the page to the top (as each day is written and added that way), as you look at a chart of the NASDAQ or it's proxy, QQQ. This will give you a much better perspective as to how I read the markets and trade. I trust you will find it very insightful and will want to get this page in real time, every day by subscribing.

Daily Commentary – Close Friday April 2, 2004

Wow – what a week! And today topped it off. Everyone has been waiting for job formation, and the consensus number was 123,000 jobs created in the last month. The optimists thought 200,000, and we got 308,000, plus January and February were also revised upward. How could they sell the market with those numbers, even though it was overextended short term. The market opened very strong, and then for the rest of the day it was like watching paint dry, ending firm and putting the icing on a great week. It’s probably safe to say the correction we’ve been experiencing has been put to rest. Now what happens? Don’t be surprised to see some profit taking short term, and the believers who did buy at the bottom have lots of profits. Be aware we are starting into earnings season with earnest, and profits should be good. Speaking for myself, I want to avoid being in any stock when profits are announced.

Speaking of profits, our system did great guns. I’ve stayed conservative in my IRA account. My margin accounts I went aggressive and thanks to stocks like MAMA, TINY and DWCH, the aggressive account was up 37% this week. The IRA was up 4.3%. Today the system went long CHINA, TMTA and SINA. I sold DHC, a defensive purchase back on 3/26, at 9.46 for a profit of $0.39 per share. The reason I sold was to have cash to buy stocks with more potential to move quickly. As of Friday’s close the IRA owned  MU, AZPN, SKX, PTN, EMRG, ECGI and TMTA. My other accounts also have DWCH, TINY, XICO and CHINA. The System Composite Portfolio also contains ALTI and MCD which I do not own.

Daily Commentary – Close Thursday April 1, 2004

The “tiny” mouse that roared. The market edged higher today, started to weaken and again they “bought 'em” at the end. The hot news today was the oil patch. Revisiting last Wednesday’s commentary, the call was correct on the top in crude and today the selling was heavy in gasoline and crude futures. Good news at the pump for all of us and a good for the markets. Another hot group today was the nano technology group. All the stocks in the group broke out VERY strongly. Another sign the traders are back to playing the long side. Fortunately we already had TINY, the best of the bunch. The system had a buy signal elected today in ALTI, although I did not personally trade it as we were already long TINY and were fully invested in the IRA account. Also purchased today was XICO.

Tomorrow is the big news day of the week – the employment number. Is the market going to roar with a good number? Or, if we get a disappointing number, we could get clobbered. And don’t forget the “buy the rumor, sell fact” mentality of traders. The sharp advance off the bottom makes me very leery short term regardless of “the number.”  But we trade stocks and step aside only on stock reports (earnings) etc, but not for general market reports. So hang on for what may be a wild ride and watch your stops closely.

Daily Commentary – Close Wednesday March 31, 2004

Oh MAMA! Despite the markets having a down day, my “stuff” did great. After over 2 months, the trading is looking up. This finishes the month and the first quarter. I use the NASDAQ as a benchmark as those are primarily the stocks I trade, with about a beta of 3 to that market. Using that as a reference, on a relative basis I have not done badly – up 0.5% for the year in the IRA whose account statements I post here. The NASDAQ is down about 1% and the S&P is up about 1% for the year.  For March the IRA lost 7.2% and with the February loss of 8.3%, that makes the first two losing months in a row in the last 15. For the 15 month period dating back to January 2003, the account is up 137.8%.

Today we had signals elected in EMRG, MU and MAMA. I am fully invested in the IRA holding EMRG, ECGI, MU, PTN, AZPN, DHC and SKX. In my other accounts I also own MAMA (and did she ever pop today!), TINY and DWCH. My margin account is up 11.3% for the year and about 8% of that came yesterday on the breakout in MAMA. I bought at 11.04 and it finished the day at 13.68.

Daily Commentary – Close Tuesday March 30, 2004

Another up day! And I am sure you have noticed that instead of selling the markets at the end of the trading day, they are now buying – a sign of a bullish market. Rather than back filling and testing last weeks lows, we have shot straight up 5% off the bottom. Also a very good sign. After a good run yesterday SKX opened lower and traders used the weakness to buy and it finished strong – another good sign. Over the last couple months we have gotten stocks that pop when we buy, but they have quickly turned and sold off. We have one more trading day in March. We are effectively even for the year in all accounts, with January’s gains melting away over the past two months. Maybe tomorrow we will end the quarter positive? We are about 75% invested at this point, with some interesting signals for tomorrow.

Today we had system trading signals elected in ECGI, PTN and DWCH.

Daily Commentary – Close Monday March 29, 2004

I guess traders/investors had the weekend to mull over the favorable market conditions last week, as the market opened sharply higher and held well all day. It would have been quite normal for the markets to start the week back filling after last week’s gains, and the fact they were strong today makes me feel there is a true shifting in sentiment out there to the positive.

Today we had a systems signal elected in BFT at 6.15, which then promptly reversed and we were stopped out at 5.96 for a $0.19 per share loss. Other long signals today were AZPN, SKX and TINY.

Daily Commentary – Close Friday March 26, 2004

After yesterday’s big gains, today was a quiet day down, day on quiet volume to end the strong week – finally! I have written a lot this week about this (possible, probable) turning point, so I’ll be real brief today. Next week, hopefully, will give us a good indication if we have put in a significant bottom.

Today we bought DHC. We sold nothing Friday. The System Portfolio Composite is long only in MCD, IED and DHC.  In the IRA account whose account statements I post here, I own only DHC. In my other accounts I also actually own IED.

Daily Commentary – Close Thursday March 25, 2004

Wow, they actually bought all day today. Big gains, good volume. Today was in contrast to the rally on March 17th on weak volume – short covering I presume. But today was different. The economic news was all good and the terrorism fears abated. Perhaps this IS the end of the correction. We’ll see…

The NASDAQ has been the leader on the downside these past 2 months. Also true is that in the frenetic trading of January, so many tech stocks had unsustainable run-ups and have been really trashed during the last two moths. Does this mean the NASDAQ will lag the S&P, if and when the bull markets continue, as so many analysts predict? The answer is yes and no. I think the stocks that were just a flash in the pan will lag and hurt the NASDAQ’s total performance. But the REAL growth NASDAQ stocks will definitely outperform the S&P 500. So don’t give up on tech. That will be where the real action is. The universe of good trading tech and biotech stocks will just be smaller. Remember, my objective is to find stocks that have the potential for an explosive move of 50% in 4-6 weeks. That does not translate to the quality of any company’s business model/earnings. Our best stock trade last year was XYBR, which has been trashed by many analysts, and now trades about $1.16. We bought it at 85 cents and in two weeks got out at the top at $2.65. It may have another day in the sun, and if it does, we’ll look to trade it again. That is my approach to picking stocks. The system reads price and volume and anticipated break outs. In a strongly upward trading general market background, selecting the right stocks can result in very high percentage gain months in my accounts. In a market trending down or choppy, I take many small losses.

Daily Commentary – Close Wednesday March 24, 2004

No, I’m not the perpetual optimist. But I am a lot more optimistic now at this low point in the market than I was in January at the top. The assumption here is that we are nearing the end of what was the long awaited correction in a very strong bull market. Looking back to the very strong decade of the 1990's, the strongest periods lasted for about a year, and like after the recent Feb 2003 - Jan 2004 run, there was always a correction. I had talked about this before it happened. I really believe we are close to the bottom. Today, the NASDAQ held it’s lows and had an up day, albeit quiet. The S&P took out its lows and rallied back, a sign the selling is abating. The NASDAQ now has found support on it’s 200 day moving average. Also a good sign is the fact that the contrary indicator, the bullish sentiment of investment advisors has fallen to 44% (below 50% is bullish).  Shorting the QQQ is used as” insurance” for portfolios in a down market, enabling portfolio managers to keep the stocks they really like as the market goes through a corrective phase. However, the fact that 70% of the float are now sold short is very high and I also read that to be a bullish contrary indicator.

Commodity prices have been a problem, even though the bond market chart does not show that. Money has been flowing into bonds as the market has weakened the last 2 months. But rising commodity prices mean rising inflation. However, this writer thinks we may be at a top in commodity prices. The dollar rallied sharply yesterday and already has reversed its fall into early February. Gold is very interesting. Gold made a low the end of January, then took out that low the end of February, then rallied with the 8 days previous to yesterday being all up days. But looking at gold stocks (you can see a composite of gold stocks by looking at the chart of XAU) tells a different story. Gold stocks never did take out their low the end of January, a bullish divergence – gold stocks usually lead the price of bullion both up and down. Then we had a second divergence, as bullion rallied sharply the last 2 weeks, gold stocks rallied only weakly and have actually declined this past week. With geopolitical tensions easing, the guess is that the gold stocks are telling us the current run in gold may be over soon.

So much has been made of crude oil/gasoline prices being so high and EVERYONE is bullish, i.e. not only lamenting the high costs but pessimistic that prices will continue rising. The chart of crude just put in what I call a triple spring top, which at the very least, tells me that a correction has started, or quite possibly a top is being put in. I plan to write an article for the website on the chart patterns of what I call double spring (DS) and triple spring (TS) tops and bottoms. These patterns are more reliable for futures than for stocks, for reasons I’ll explain in the article. The net of it is, is that DS tops have a high degree of reliability in predicting a top, but are not reliable indicators at bottoms. TS bottoms tend to be very reliable, and occur fairly often. TS tops occur rarely, but are extremely reliable. The last TS top I saw was in the Eurodollar which marked the top of the Euro on Feb 14th at $128.50. The Euro now stands at $121.

The point of all this is that the time is ripe for the next leg up and the bull market in stocks to begin. Keep the faith. I will continue to trade from the long side, despite it having been a brutal last 2 months. My major fault in trading stocks is that trading often unfolds slower than I anticipate, as compared to futures. Consequently I can be (to) early in buying stocks that do not break out – this is especially true when markets are trending down or are choppy. It is also the reason I like to scale out to take profits after a big run-up. Today we were stopped out of XMSR at 26.00 for a profit of $0.07 per share and ARTX at 2.00 for a loss of $0.10  per share. The System Portfolio composite is still long MCD, IED, CSTL. We bought nothing today.

Daily Commentary – Close Tuesday March 23, 2004

The market was all over the place today. After opening higher, sellers became bolder when there was no good buying after the initial surge. Bottom fishing traders were quick to do the reverse after the market traded into negative territory, and the market moved up until the half hour when they tanked it again. This market just falls on it’s own weight with no news to inspire strong buying. But when that news comes, whatever it is, the next move up could be explosive. We’ll just continue to trade. I’m now barely positive for the year. Beating the market averages is not much of a consolation after being up 18% in January. But that’s the market.

Today we were stopped out of SVVS at 2.00 for a loss of $0.12 per share. We bought the very thinly traded CSTL. Risky, but looking at the chart will show you why I thought it was worth the risk of losing 0.5% of equity.  The System Portfolio Composite is now long 5 stocks: ARTX, MCD, IED, XMSR and CSTL.

Daily Commentary – Close Monday March 22, 2004

Well so much for last week being the bottom.  Geopolitical events around the world spooked the markets and our markets here took their cue from the international bourses and headed lower from the get go. Volume on the NASDAQ ran heavy. As I wrote in our “Understanding Risk/Reward,” there are certain market risks that can and can’t be avoided, and the worst unavoidable risk at the moment is another terrorist attack on this country, which will kill the markets and surely hurt our economy. If you want exposure to the stock market, it's a risk you take and cannot control.

Terrorists are not stupid. They need not bring down another major landmark or a government building. All they need to do is bomb a bridge, tunnel, blow up a restaurant, stadium, etc.  You get the picture. It’s been 2-1/2 years since 9/11. So why has it not happened? I think it is reasonable to think they have certainly tried but have been foiled. If they succeeded, the news would be all over the airwaves. But if they were foiled, the government would have nothing to gain and a lot to lose in telling us. All it would do is scare the people and that in itself would have a tremendous effect on the economy. Maybe I see too many movies, but my bet is that our best have kept us physically safe and mentally secure. But the spector of the Spanish train terrorist attack and the Israel assasination of the Hamas leader did have quite an impact today. 

We had a lot of buy signals set up by last weeks trading range and needless to say, just about everything broke down with the lone exception of ARTX, which we bought today. Sold today was LOOK at 1.77 for a $0.09 profit per share. Sold for losses were LU at 3.89 for a loss of  <$0.13> per share, SIRI at 3.08 for <$0.11), RIMM at $93.50 for <$1.17> and VSNT at 1.92 for <$0.29>. Despite the risks per stock being small and worth taking, as I explained last week, they are losses nonetheless. The risk in trading is thinly traded issues like VSNT is high, as we saw today. The market was called sharply down in the pre-opening and someone must have put a market order in to sell VSNT and the best bid was 1.37 and thus it opened at that price. A stop order to sell at $2.00 (our stop) would have been elected at the market when it opened at $1.37. We had no stop in the market, as we have advised in low volume stocks. Buyers rushed in at $1.37 and it quickly traded higher and we got out at 1.92 (high was 2.02), a victory considering it could have been a disastrous trade. 

Daily Commentary – Close Friday March 19, 2004

Well we didn't get the strong up day I was anticipating (and hoping) for. Volume was running light and it looked like we were going to have a quiet, uneventful inside day. But selling started in earnest in the afternoon. That in itself wouldn’t be that bad, except the way the market finished on its lows is not a good sign technically, even though the excuse was triple witching expiration of options and futures. Even if the last week’s trading action is to be a bottom, it would be quite expected for it to be tested. Off of Friday’s action, it looks like Monday morning could be important, and if it starts weak, we would need to see buying to come in and have an up day.  Now for the good news. Sentiment is worsening and the put/call ratio spiked to 1.03 Friday, both bullish signs. A lot of good stocks have bounced or stabilized and have not been pulled down by the force of the last two down days of market action. Given the market conditions, it’s somewhat hard to believe I am getting almost fully invested, and it will be hard to choose from the list of stocks that my system has buy signals in for Monday. The way I trade the system, times like these have the highest risk and the highest reward. Highest reward, because the system is not a pure momentum system, as it is anticipatory of breakouts. High risk, because a small bounce from here gets me fully invested and if there is a another down leg to come, that translates to many small loses. So, as I have been doing, I’m looking at trades that carry a risk of less than 1% of equity. In other words, I’m trading a conservative model, meaning on average I commit 10% or less of equity per trade.

Let’s put the markets in perspective. On a daily basis it's all about sentiment. That creates the up and down choppy action within all trends. And the markets in this correction are fretting about interest rates and job formation. There is no doubt the economy is growing rapidly. Interest rates – does it really matter in the long run if the Fed raises interest rates from 1% to 2%? Is that going to change anyone’s spending plans – consumer or business? During the recession when the Fed was  dropping interest rates, the knee jerk response was at first favorable, then the markets continued their trend down. Expect the same thing to happen on the way up this time. Jobs - to listen to the Democrats, you’d think we were in a recession. We are about 1% away from full employment, and there are more people working today than ever before. Those laid off in technical fields are finding it tough to find new jobs, that is true. However, that is the area that was most out of wack when the tech bubble burst and kicked off the last recession. That will all take a bit of time to resolve itself. Companies, once burned,  are smarter and very reluctant to make the same mistakes as they redefine and reinvent themselves. They have gone from being brash to very conservative. We are still losing manufacturing jobs. Don’t expect that to change – this is a global economy. But we are much better off than 20 years ago. Back then we were losing manufacturing jobs and growing the service economy. It was a real concern that we could not survive as a super economic power if our only real economic strength was being a service economy. Today, we don’t hear much anymore about Japan eating our cake, because then along came the computer and the internet. And America found it’s niche – technology. Today, that is what we make and no one comes even close. Technology, including biotechnology, is our future. It changes everything we touch and the way we live our lives. Technology is the engine of our economy, what pulls all the other cars in the train – communication, medicine, manufacturing, services, transportation, retail, leisure, etc.

Why do you think the tech heavy NASDAQ went up 50% last year? Not because of 2003 profits, but because of the promise of rapid sales and profit growth in 2004 and beyond. And all the tech stocks to one degree or another had their run-ups too. What this correction will do is sort out the real winners from the also-rans. And the way you will know who is for real is not from the fundamental analysts, but from the collective opinion of everyone who buys the stocks  – just look at the charts. In the bull market, the rising tide lifted all boats. This correction has brought some of these stocks down with a thud. Others have held up quite well. Don’t let pundits, including many in high places, scare you – they are rarely right. For example, two of their favorites to bash have been JNPR and RIMM. Look at the charts of those stocks and you will see a different story, and yet they have 10-12% of their shares sold short. LU is another stock that has been performing well in this correction, and with short interest about 300 million shares (4 days average trading volume) the potential is explosive above the recent high of $5. Thursday, Lucent received an analyst upgrade with a price target of $5, which made me laugh. If LU gets to $5, you definitely do not want to be selling it there. Where do these guys come from?

We have nothing against selling short. But the risk/reward in this market is much better to the upside, even in this corrective phase. Well, I’ve ramble long enough…

Friday the system had buy signals elected in RIMM and SIRI. Many of the other stocks we had buy signals just marked time, and are set up again for Monday, if they hit the stop price. We sold nothing Friday. The System Portfolio Composite is long ARTX, MCD, LOOK, VSNT, IED, SVVS, LU, XMSR, SIRI and RIMM. In the IRA account whose account statements I post here, I own LOOK, SIRI, LU, SVVS, XMSR and VSNT. In my other accounts I also actually own IED and ARTX.

Daily Commentary – Close Friday January 30, 2004

We are off to a great start in 2004. The markets were very strong for the first part of the month, topped out and corrected last week. Depending on which indicators you use the markets were up 1.6% (S&P 500) to 3.8% (NASDAQ). The IRA account I post here stood at $39,072, up $5937 or 18% for January. The Harris brokerage statement will be posted on here when received. My best (aggressive) account was up 30%.

Where are we now? Good question. We are in a correction, but is it going to be shallow? We should have some indication early next week. After looking at the entire list of stocks we watch, from the way we generate buy signals, it will take a few days for buy signals with low risk entry points. In a correction there are very few buy signals. At a bottom and the first week up, there can be large numbers of stocks with buy signals.

Thus we did not take any new positions today. Our System Portfolio Composite is still long 8 stocks: IIJIE, ALAN, ANDW, DCGN, PROX, GERN, PCLN and ORCH.  The $2000 portfolio (buying $2000 of each stock) was up 15.3%. As of the close Friday the IRA was all in cash, up 18% for the month, and only ORCH was in my other accounts.

 Daily Commentary – Close Thursday January 29, 2004

Traders wishing to sell stocks, but who were not already out as of Wednesday, used yesterday's positive opening to sell during the morning. After the selling dissipated some bargain hunting came into the market. In view of the mild correction scenario I discussed yesterday, today’s developments were positive. This is an interesting time as it becomes obvious that there are certain stocks which have had big run ups in January, that are going down begrudgingly. Look at the charts of stocks (free sites are BigCharts.com and StockCharts.com) like LU, JDSU, ALAN (in the model portfolio) and BVSN. That is not to say they won’t take a dive later. BVSN is a classic example. Last May we almost got a double as it exploded upward for 2 weeks. After that it did absolutely nothing, spending the next 7 months sliding all the way back down to $4 per share. Then it took off again this January (we did not get in), and has acted very well during the last few days when tech has been particularly weak. Impressive. Perhaps this time the stock is for real.  I would not think of buying here, but if and when it corrects in a positive way, as to fit my systems screens, I will look to buy it. I’ll be anxious to review the charts of the entire list this weekend to see which stocks have strong legs and which ones buckled badly under the strain of the overall market sell off.

We did not sell any of the 8 stocks in the System Portfolio Composite today. We only had one buy signal today. The stock did nothing. Thus we did not take any new positions today.

Daily Commentary – Close Wednesday Jan 28, 2004

If yesterday was ugly, today was brutal. The Fed pronouncement of not raising the interest rates was the catalyst, and analysts tried to read the nuance of every word and phrase in their press release. But the real fact is that the market was edgy and looking to sell off. The suspect market action was confirmed yesterday and traders dumped stocks with a vengeance. So this puts us squarely in a corrective phase.

The QQQ is a fair measure of the NASDAQ and the System Portfolio Composite (which tends to be 2-3 times as volatile). With yesterday’s close, most of January’s gains have been wiped out, the QQQ and NASDAQ being up only 2% from 10% at it’s peak at mid January. My accounts are up a minimum of 18% this month as of the close today, so we have played this run very well indeed.

I sold 8 of the 16 stocks in the System Portfolio Composite: Losses were CHINA (our second position) at 11.27 for a $0.55 per share loss, SATC at 2.70 (loss $ 0.19 per share) and TMTA at 3.85 ($0.15 per share.) Profits were booked on CHINA (our first position) at 11.27 for a profit of $3.08 per share, AMTD at 15.90 ($1.99 per share), SINA at 45.00 ($0.09 per share), VXGN at 10.05 ($2.64 per share), MTON at 3.10 ($0.49 per share).

We took no new positions today.

So you might be wondering, if I saw this coming and yesterday was a rout, why didn’t I sell everything. My philosophy is trade the stocks first, the market second and never trade on the equity value of the portfolio nor trade on emotion. Thus, there are 8 stocks that in themselves still look OK on the charts.  Three of the 8 stocks actually went up yesterday.

The question, which will only be answered by the market itself, is whether this is a short term correction of the last 6 week run up, or are we going to go into a longer term correction of the last 7 months. So how to play it? Looking at the S&P, it has outperformed the NASDAQ. This is the first (and perhaps only) leg down for the S&P. The NASDAQ on the other hand is in the third leg down and thus might find a bottom that is easier to read.  Looking at a chart of the QQQ, this great run started at 34 and ran to 39, so a 50% correction would be ca. 36.5.  The 50 day moving average is about 36.25. Thus if this is going to be a simple 1-2-3 correction and if the QQQ hits these levels and stabilizes, we very well could get another powerful leg up.  If any rally from there breaks down, then we are in for a longer term correction.

The market action of the last week has destroyed the favorable chart patterns of the stocks we watch in 90% of the cases. Those stocks may take some time to stabilize and start to recover. The stronger stocks will hold well during a correction of this type and will be the ones to take off again. Here is a case where relative strength is very important in my screening. 

Sorry to be so wordy, but today’s action makes it a very significant day and I wanted to share my insights. 

Daily Commentary – Close Tuesday Jan 27, 2004

Uggggly! The complete opposite of yesterday. The market opened flat and promptly sold off and went down, relentlessly, all day. Counter trend was the Nano technology group we follow. Looks like they have more gas in the tank still. There are a number of strong stocks that resisted the down trend setting up buy signals tomorrow. The dilemma is if the market bounces temporarily, we may put in some of these stocks and then suffer losses if the weight of a falling market drags them down. As I have been doing, I will take the lowest risk trades in conservative quantities. Caution is the order of the day. But, I do not pretend to know what the overall market is going to do from here. For me, it’s much easier to trade specific stocks than the entire market.

All the pundits are making their 2004 predictions, based on fundamentals of the companies. I look at these companies, because if they look good technically, they can be good buys at some point in my system. Fortune Magazine has such an article “The Top Picks From 50 Great Investor’s.” Only 3 of the 50 were on my watch list. I added none of the other 47 as none came close to meeting my criteria to get on the watch list. One stock was actually down 50% over the past 6 months.

Obviously, we took no new positions today, nor were we stopped out of any positions. 

 Daily Commentary – Close Monday Jan 26, 2004

Well so much for the correction – at least off of today’s powerful rally. The S&P was strong making a 31 month new high and the NASDAQ appears to have saved itself. The volume wasn’t convincing, but… We took signals today in CHINA (again) which broke out of the recent consolidation quite nicely. We also bought ORCH and TMTA. The short we had in XING was a victim of the strong market and we were stopped at 15.00 for a $0.75 per share loss.

 Daily Commentary – Close Friday Jan 23, 2004

After quite a run, the markets this week ran out of steam. The S&P had been up a remarkable 8 weeks, ending this week essentially flat. The NASDAQ was up 5 weeks before this week’s reversal. Is this the start of a correction? It remains to be seen. The stocks we trade have an average beta of 3, meaning they are 3 times as volatile as the market averages. That means we make money faster percentage wise when we are moving up but it also means we lose faster when going down.  As mentioned yesterday, we continue to monitor the stocks in the System Portfolio Composite very closely and closed our positions in 15 more stocks.  XLA at 2.70 for a ($.01 loss per share). Profits were taken in ATRS at 37.60 ($3.55 per share), UNTD at 20.02 ($2.82), COMS at 8.49 ($0.26), XYBR at 1.93 ($0.29), NANO at 21.49 ($4.89), VWPT at 0.88 ($0.08), ADSK at 26.03 ($1.25), MXT at 6.38 ($1.77), SOFO at 2.00 ($0.04), AVAN at 3.48 ($0.48), APHT at 7.30 ($0.87), INSM at 3.90 ($0.43), NTE at 31.90 ($0.90) and STEM at 2.38 ($0.19).

We stayed long 13 stocks that remain strong despite overall market weakness. Unfortunately, we had none of these 13 in our IRA account posted here and as of today’s close we were entirely in cash at $39,200, which is up 18.8% for the month so far. Not too shabby… The 13 stocks in the System Portfolio Composite are CHINA, IIJIE, ALAN, AMTD, ANDW, SINA, DCGN, PROX, VXGN, GERN, SATC, MTON and PCLN.

This market has a lot of momentum, so rather than breaking down quickly, I would not be surprised if it moved higher yet, or spent a couple more weeks churning as it puts in a top. If all that sounds like I have no clue, I couldn’t argue with you. I am just being very cautious in here. I believe at some point we will have a major correction which will represent a great buying opportunity for another strong leg up. I will continue to take system trading signals but look for very low risk trades and scale back to about 10% of equity in my purchases.

 Daily Commentary – Close Thursday Jan. 22, 2004

Is this another pause or is this a top we are putting in? As I read the tea leaves, the NASDAQ says top, the S&P is neutral. The price action of both indexes was pretty sorry today. Our $2000 Composite was down 1.5%, worse than any of the averages all of which were down. My IRA account was actually down 3% at one point today, but the rally in XYBR and STEM brought it back to only a 1% loss. The system was long 35 stocks, which were up 19% despite the lousy action. As I discussed we had tightened stops and today we exited many stocks and took profits and raised our cash position. Sold for losses were SONE at 8.64 for a $0.64 per share loss and IPA at 4.70 for a loss of $0.16.  Profitable closed trades were PROX at 2.30 (profit $0.69), one from the double position of AMTD at 16.36 ($2.87 profit), NITE at 14.63 ($0.53 profit), one of double positions in NTE at 32.16 ($2.90 profit) and ZRAN at 20.24 ($2.08 profit).

We did not have new long positions today. For the aggressive accounts the system is short XING. Speaking of short sales, getting stopped out yesterday in LEXR stings as it was down $1.92 today on big volume. Oh well…

 Daily Commentary – Close Wednesday Jan. 21, 2004

We sold one of our positions in NANO before the close at 21.49 for a $5.24 per share profit. The stock and the entire group looks tired and the momentum has slowed. Coupled with my leeriness of the overall market in here and the stock's weak close made the decision seem like a good one. For the same reasons I sold my remaining XING at 14.80 for a profit of $5.79 per share.  From our System Portfolio Composite, we sold one of our double positions in NANO and COMS. We were stopped out of our one short position, LEXR on the open today at 18.47 for $1.03 per share loss. As luck would have it, in after hours trading it was down $1.75.

We received buys signals today PCLN which popped nicely. STEM, which we bought yesterday and did nothing really popped today. Our accounts were up 1% or less for the day. The system composite of all open trades was flat. The S&P had a good day up 8.85 while the NASDAQ was down 5 points after shaking off early morning weakness in the tech sector.

After the big Saddam Hussein capture reversal day on Dec. 13th, when the market open up strongly and sold off in a big reversal, the markets have moved almost straight up since then – 6 weeks. As I have for the past 2 weeks, I am still looking for a correction. It has to come. But we continue to play the game, skeptically. The S&P has risen about 8% and the NASDAQ about 15% since then. Our real accounts, as well as our System Portfolio Composite has outperformed the markets significantly, so it has paid big dividends not to try to outguess the top in the markets.

Daily Commentary – Close Tuesday Jan. 20, 2004

We sold our position in SONS at 9.33 intraday which was after a breach of a secondary low made in the morning. After the close SONS was to announce its earnings, but postponed the release due to their audit not being completed. It spooked the market and SONS was off $1.50 (11.5%) in after hours trading. This is the same effect as the market being disappointed in the quarterly results. These are risks we want to avoid and it looks like we have saved ourselves a 2% hit to our portfolio balance. We got executed on buy signals in AWA and also got stopped out of it today for a 32 cent loss per share. Other buys were IPA, XLA, MTON STEM and NTE.  All had impressive breakouts except for STEM which went nowhere.

We got stopped out of VPHM at 3.17 and JMAR at 3.90.  VPHM looked like a nice trade, up 20% in 6 days, then yesterday they clobbered it on very high volume of over 2 million shares. The hot NANO technology group looks tired, except for ALTI, which has been trading counter trend to the group lately. We had a tight stop on JMAR and will also tighten down our stops on NANO, which has been very profitable for us so far.

Our System Portfolio Composite is now long 38 stocks (33 different plus 5 double positions in PROX, NANO, NTE AMTD and COMS.  Based on our “$2000 Composite” these stocks are up 19.7%. I am actually up about the same percent, owning 9 of these stocks. On balance it was a flat day for our positions with the S&P down a touch and the NASDAQ up a touch.

 Daily Commentary – Close Friday Jan. 16, 2004

The earnings for the much maligned Juniper Networks (JNPR) surprised the street and the stock along with the entire networking sector took off. We had a buy stop on SONS at 8.33 and it really popped closing at 9.28. However, be aware that SONS reports quarterly earnings after the close on Tuesday Jan 20th. Despite it looking strong, you have to consider the risk of holding through the announcement.  I will close the position before the close Tuesday.

After a great run, I liquidated my position in Lucent (LU) at $4.75 Friday, $.14 better than the closing price for a profit of  $1.81 per share in only 9 trading days (60% gain).  Lucent is due to announce earnings BEFORE the market opens on Wednesday January 21st.  I may have been premature, but the price action looked tired on Friday and since the stock appears very overextended short term, it was either take the money off the table now or before the close on Tuesday.  I elected today.

XING, the Chinese Telephone Company completed a nice 5 wave advance on Friday, closing down at $14.26. I took partial profits (bought Jan 2nd at $9.01).

We’ve had a remarkable run in the markets to start the new year. Of course, it can’t continue straight up, but so long as the overall market at least churns as opposed to taking a major reversal on high volume, we’ll stay with it.  But I will get tight with stops.

In the IRA account posted here monthly, as of Friday’s close I held XYBR, AVAN, VPHM, JMAR, SONE and SONS. In my other accounts also were APHT, ADSK, INSM, XING and NANO.