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INM Nov '09 - Let Market Action Help Manage Your Expectations
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net
CANSLIM.net


Nobody said it would be easy, or if they did they were lying.  I know that investors have great expectations of the investment system we employ with discipline. The calls and emails we receive are less occasionally raves from someone who just landed a great profit, while they are more occasionally rants about another stock that failed to produce much of anything but frustration. Such has been the case during the market's 2009 rally especially, and the level of investors' disappointment has been only heightened by the market's latest "correction."  So, when the market isn't making it easy, what are you supposed to do?  Take it easy and step aside for a while.

I know many of my readers are easily distracted by the story stocks of the day, and they quickly get bored when they step aside.  That must be why they still ask about investment ideas that take us on a detour from the planned route.  Two months ago they wanted to concentrate in only a small handful of stocks the way it is described in "How to Make Money in Stocks", but now they call and ask about 2X and 3X leveraged ETFs inversely associated with the market.   Three months ago they wanted to be strict practitioners of a proven successful investment approach, but now they ask what I think about buying a blue chip and writing the covered calls.  Managing expectations must not be one of my strong points!  How can I convince people that the right thing to do is just to step aside and wait?  Perhaps their confidence has been shaken in the system, and then doubt quickly overpowers the sane approach of simply pausing. 

Another client called us and recently asked, "Is there a way I can hedge against a falling real estate market?" The best quick answer I could come up with was, "Pull out all the equity."  The problem that many have, including my brother in California, is that the equity in their homes (while they do indeed have some meaningful amount) is virtually inaccessible.  The way the landscape appears, falling home prices and uncertain conditions are making lenders resist lending despite the policymakers' entire stimulus.

Maybe because of past successes I am more fanatical about the approach than others, but pausing and stepping aside served us and our clients very well in 2008, and in other ugly market periods.  I know everyone is anxious right now to see progress made in their portfolios, and they became sold on the investment system because of its potential to achieve impressive progress at that. It is very important to keep what we want from getting in the way of what we must do.  We want progress, and we want above average returns. The market direction (M criteria) is critical for us to monitor, and we want to let its actions dictate our actions.  When people call and ask what I think, I tell them what I think has little to do with it - what the market thinks is what matters most!

I am bullish at heart, and my belief is that the liquidity-driven rally will eventually resume.  Disbelievers will abound as the market climbs the "wall of worry" and world events create the occasional ripple.  Anyone who recalls the late 1990's rally where the S&P 500 Index produced back-to-back-to-back gains in the +25% range might also remember the steep but rather short-lived corrections in 1997 and 1998.  They made trading "difficult" if you let it frustrate you, but each time provided a much-needed shakeout which helped to sort out the stocks which had run their course from those which were only setting up solid foundations for another very substantial leg up. The late 90's rally went a lot higher than many expected, and my own experience was such that our clients' most magnificent gains came during the final phenomenal leg up.

We have seen and made reference to the point the book and the newspaper make that the best winners show up during the first 13-weeks of a new confirmed rally. In 2009 that may have held true too, however the early leadership was not a good crop of healthy growth companies with stellar fundamentals.  Throughout the recent rally, we saw more and more participation from the high-ranked spectrum of stocks we focus on, which is encouraging news.  There will eventually be yet another confirmed rally with a follow-through-day. While we are waiting, we need to study up and be familiar with the companies sporting the strongest fundamentals and showing strong price/volume patterns.  My expectation is that, with persistence, we will find great success by following the rules.

About Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net :
Kenneth J. Gruneisen has successfully completed the CAN SLIM® Certification Program.  Mr. Gruneisen became a Registered Representative in 1987 and his career includes experience offering personalized assistance to investors with more than a decade of experience as a Registered Principal managing a branch office.

The recommendations made by CAN SLIM® certified individuals are their own and may not be attributed to the CAN SLIM® Certification Program, William O'Neil & Co., Investor's Business Daily or their affiliates. The CAN SLIM® Certification indicates only that the individual has successfully completed the CAN SLIM® Certification Program. CAN SLIM®, William O'Neil & Co., Investor's Business Daily and any of their affiliates are in no way responsible for any loss or damage caused as a result of the services provided by these individuals.


Comments contained in the body of this report are technical opinions only and are not necessarily those of Gruneisen Growth Corp. The material herein has been obtained from sources believed to be reliable and accurate, however, its accuracy and completeness cannot be guaranteed. Our firm, employees, and customers may effect transactions, including transactions contrary to any recommendation herein, or have positions in the securities mentioned herein or options with respect thereto. Any recommendation contained in this report may not be suitable for all investors and it is not to be deemed an offer or solicitation on our part with respect to the purchase or sale of any securities.

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The recommendations made by CAN SLIM® Certified individuals are their own and may not be attributed to the CAN SLIM® Certification Program, William O'Neil + Co., Investor's Business Daily or their affiliates. The CAN SLIM® Certification indicates only that the individual has successfully completed the CAN SLIM® Certification Program. CAN SLIM®, William O'Neil + Co., Investor's Business Daily and any of their affiliates are in no way responsible for any loss or damage caused as a result of the services provided by these individuals.

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