-- Posted Wednesday, 25 May 2005 | Digg This Article
Rick’s Picks
Wednesday, May 25, 2005
For investors who’d rather be smart than lucky
If red were to come up on a roulette wheel ten times in a row, would you start betting only on black? Many less-seasoned gamblers would, perhaps even increasing their bet size if the streak continued. That might sound like a way to make a huge score eventually, but in fact those who bet like this habitually are almost guaranteed to die broke. For, sooner or later, they will have everything riding on a single spin of the wheel, and then red will come up one more time in a row than anyone in the casino can recall.
So what does that tell us about the immediate prospects for the QQQs, which have risen on eighteen of the last 20 trading days? It’s tempting to argue that the tech-heavy Nasdaq 100 index can’t keep going up like this forever. While correct, we shouldn’t be too eager right now to fade a winning streak that may yet prove to be longer than anyone on Wall Street can recall.
Actually, seasoned speculators might be inclined to bet the streak will continue, knowing as they do that the stock market is not roulette. Russian roulette is probably more like it, since each new bullish day for the QQQs brings bears that much closer to pulling the trigger for a suicidal explosion of short-covering. We can only speculate as to when this will occur. Perhaps it won’t be for weeks, when the streak has reached 32 days out of 35. Or maybe it will be as early as Friday, after the QQQs have rallied for two more days and are threatening to do so again as the week draws to a close. Although we personally cannot recall the Nasdaq having risen for as long as it has already, we’d prefer to leave the betting to more daring souls.
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2005, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Wednesday, 25 May 2005 | Digg This Article
