Newsletter

July 29, 2006

Committing to Success

Market & Sector Review
Where's the Beef - Part 2

Largest Changes This Week

This Week's Economic Reports
Committing to Success

If there's a single belief that seems almost inseparable from success, it's that there's no great success without great commitment. If you take the time to look at successful people in any field, you will find they're not necessarily the best and the brightest, the fastest and the strongest. What you will find is that they're the ones with the most commitment. "To follow, without halt, one aim: there's the secret of success" - Anna Pavlova

You see this in any field, even where natural ability would seem to have the strongest hold. What made Larry Bird one of the great basketball players? It wasn't speed, nor was it his jumping ability. He certainly was not graceful, often looking as if he were playing in slow motion. He succeeded because of a great commitment to success. He practiced harder, played harder - he simply wanted it more, and made the most of his skills. Tom Watson's (the great golfer) coach at Stanford once said he marveled at Watson, "I never saw anyone practice harder". It's the quality of the commitment that separates the good from great.

At 15 a budding actress went to a dramatic school in New York and was thrown out for a lack of talent. Somehow, she always knew she would someday make it as an actress. She didn't give up. She was committed. Her name, Lucille Ball. When she married Desi Arnaz every studio and company said that Americans would never accept a girl like Lucy being married to a Cuban. So to prove them wrong, they put on a Mr. and Mrs. Vaudeville act. They were both committed. I'm sure you know the rest.

If you wish to be successful in the markets, first make a commitment to learn everything you can. Start building (if you haven't already) a good library, not only for learning but also for future reference. It sure would be a waste to spend your book money on donuts, don't you think? Seek out and become friends with people who are successful in the marketplace. Learn from them - ask questions. You will be surprised at their willingness to help. They may even learn from you, and they know that. Your questions may jog their memory or spark an idea.

Successful people are willing to do whatever it takes to succeed. That as much as anything else separates them from the pack. Of course it goes without saying, you do whatever it takes to succeed without harming another person.
Market & Sector Review
Where's the Beef - Part 2

Due to a week with an extremely heavy schedule, including our traditional trip to the opening day of the thoroughbred meet at Saratoga race course, some of the graphs and charts contain data from earlier in the week. Simply visit the members' area of the Prudent Trader for updated information.

Last week I discussed three sectors that recently have been outperforming the market in the face of declines in the major averages and was contemplating whether these sectors may indeed fight any bear market. This week let's break these sectors down and attempt to determine where the strength is. The sectors discussed were: Food and Beverage; Real Estate; and Utilities. The data in the members' section utilizes data from my data source (TeleChart), TeleChart utilizes data from Hemscott Corporations Media General Industry Groupings. If you do not have access to Media General charts for groups, Bigcharts.com uses the Dow Jones industry groupings and supplies charts for those industry groupings as well. While the two data sources group a little differently, the similarities should become apparent during your research.

Now let's return to the Media General definitions by going to the SECTOR ANALYSIS - Industry Group - Relative Strength Tables - the left most column in the member's section and sort out the individual groups. Within each sector I have sorted by relative strength against the NYSE over the last six months. Here is what we find:

Notice that all of the Food & Beverage Sector groups are improving on both a six and a twelve month basis. Brewers are the strongest in the sector with soft drinks making perhaps the greatest improvement during the last month. Moving on to Real Estate, the REIT's are the strongest: Residential first followed by office and then diversified/industrial. Again all the groupings are improving to various degrees. Finally the Utilities which in last weeks letter basis the sectors chart picture and composite data looked perhaps the best of the three. Now we find three groupings improving and two that are not.

For new members unfamiliar with the Relative Strength Blinkers in the reports above, as well as the reports that compare stocks within groups and sectors, or if you wish to review the outline click on the following link: Relative Strength Blinkers. This section of the reports was suggested to me and designed by one of our members who hails from Southern California, he provides a detailed description on how he successfully uses these relative strength blinkers. He initiated our discussions and was principle in putting it all together. I know many members have encorporated these blinkers into their trading, and hopefully as well as the designer. There is nowhere else on the internet it can be found, at least to our knowledge.

We have now accomplished some very quick research to determine there are between six and nine groups that should be investigated further, let's start with some charts:

MG347 Beverages-Brewers initially began to outperform the market as a whole (i.e. Relative Strength line above zero) during April 2005 and has stayed above the zero line since. In October 2005, MG349 Beverages - Soft Drinks began to trade under the zero line, i.e. weaker than the market as a whole, until just recently when it crossed back above that line July 11, 2006 showing its new found strength. A similar situation in the Real Estate Sector REIT's: Residential REIT's trading above the zero line since April 2005 with very brief dips below, and Office REIT's just recently trading above the zero line after a long stint below. Both of the Utility groupings above have also just crossed the zero line after long periods below. Crossing of the zero line is not in and of it-self a buy or a sell signal, it is a sign that these groups are outperforming the market over the last six months and most often when that happens they will have a tendency to stay in that position (outperforming) for months to come. Unless something changes, you want to trade from the long side.

Now that we have looked at and discussed the group's charts and relative strength positions let's see if we can't find some good trade-able stocks to put in our watch lists. For brevities sake I will only look at one group within each sector, however do not ignore the others mentioned, as they may contain better situations for you. Depending, of course, upon your individual criteria. Simply go to the Members' section again and click on Compare Stocks within Industry Groups, let's see what we find.

When looking through our data, or anyone else's data and/or charts, searching for good stock ideas remember you must make your own decisions and keep those decisions in line with: your trading plan, your current financial condition, your goals and objectives, your own risk parameters, and perhaps most importantly your psyche when it comes to trading the markets and risking money. Hopefully no one knows you better than you know yourself!
Largest Changes In Raw Numbers (21 Days)

This Week's Economic Reports

Have A Great Week!

Bill

Disclaimer: Trading in securities, of any type, may not be suitable for all individuals. The contents of this newsletter are not a solicitation to buy or sell securities. The opinions expressed are solely that of the author. You must do your own research, contact your own financial advisor for suitability of any investments. Data gathered is from sources believed to be reliable, but NO guarantee as to their accuracy is made.