The Tycoon Report

Making the Most of a Bull Market

Thursday, October 11, 2007 | Chris Rowe

Thank goodness for technology. 

I'm sitting here in my friend's cold, one-bedroom apartment in Queens, NYC.  He will eventually join the rest of us earthlings and get an internet connection along with a computer.  But until then, I'm writing my Tycoon Report article from my (what Dylan likes to call my "Dingleberry") Blackberry.

What can I say about this market?  Everything I touch lately jumps higher immediately.  In times like these, it's especially important to remember not to get cocky.  Everyone's a genius in a big bull market like this one.

Make no mistake, the strength is increasing each day, with the major internal indicators that I follow showing more and more stocks moving to buy signals each day.

Following the internals will lead you to an extremely clear understanding of what's REALLY happening in the market, and will give you an idea of where the strength lies and where it's most likely to be in the near future.

Be sure to identify the strength in the market, too.  When you talk to your broker, ask him or her which sectors are showing the most strength.  If your broker can't tell you where the most strength lies (based on FACT, not opinion, including the opinion he heard from a "reliable source"), then he should be fired immediately.

If your broker gives you a completely different answer each time (today it's financials, tomorrow energy, then in three days it's luxury), then before firing that broker, clarify whether there is a miscommunication.  Be sure he or she isn't telling you where the strength is on THAT particular day.  We don't care about a daily difference.  We want to know what the major trend is.

Here's why: sectors tend to stay on relative strength buy signals for two years on average.  You should focus on sectors that are outperforming the market, as well as outperforming other sectors.

Energy is one place to find strong relative strength, and it has been for a long time.  When the market corrected, energy stocks, especially oil service stocks, held up the best.  That means they will likely be one of the strongest groups in this bull market.

Precious metals is another sector outperforming others.  Waste management is another.  The internet sector, the telecommunications sector (mainly wireless) are sectors showing the most strength.

So focus on internals, which will give you some insight as to what the market's next move will be.  And focus on relative strength.  This way, you aren't only in stocks that are moving "up", but you're in stocks moving up more than your average "up" stock.  And when the market corrects again, your stocks will show resilience.

Does anyone remember the poll I took in September asking who knew what the strongest month of the year has been since 1991?

The answer is October.  The next strongest months are November and December.

My two biggest problems at The Trend Rider lately are:

1) Recommending call options that shoot up 10-15% within a couple hours after I hit my send button.  People aren't always able to get in fast enough.

2) Convincing new members that it's best to wait for a pullback, and not to chase the ones that run away. 

3) Convincing new members that it's still important to look for certain criteria in a stock before they act on it, even though the popular averages are moving higher.  It's hard to sit on the side sometimes while you hear the media screaming that the market's breaking highs, so this is the best opportunity ever.  The fact is that in my mind, the market from 2000 - 2002 was the EASIEST one to make money in.  (Today's might be the second easiest.  But that doesn't mean you should close your eyes and buy.)

Keep your standards high in this market as you would in any market.  Don't be afraid to sit on the sidelines until you see "the perfect" trade.

Until next week, when I promise you a better article with images.  (Hard to do from my Dingelberry!)


“Profit from the Trend”

Chris Rowe
Chief Investment Officer
The Trend Rider