Sell all stocks now! Stocks/Indexes to Sell Short

We are issuing a major and potentially longer or intermediate term sell signal for all stocks, as well as some short sale recommendations for those able to assume a higher risk. If you really want to hold on to some stocks remember the rule that you should run profits and cut losses. It is much more important to sell losers than winners. Winners may take a severe tumble but they are the ones most likely to get going again when the bull market resumes. On the other hand, some losers never recover.

On the basis of the close of business on Friday, there was a weekly Lindahl sell signal for the small-cap Russell stock index futures, occurring at the declining 40-week moving average. The huge outside down day on Friday is a call for action. The Russell never came close to reaching last year's high, never mind going out to new highs. This index has a confirmed bear market designation, and there is potential for it to revisit the lows of last October, about 25 percent under the current level.

The Dow 10,000 level could easily become a long-term barrier of greater significance. In the meantime, several noteworthy things have been happening. A very small handful of stocks like Amgen, QLT, America Online and MCI Worldcom just keep on going. But the list gets narrower and narrower. Then we have had a pick-up in the oils and oil service stocks that have bolstered the indexes even as IBM and McDonalds have been hesitating. This newfound strength in the indexes really disguises quite a lot of underlying weak and suspicious market action.

Normally, we would be very wary of selling out great stocks like our Amgen and QLT, but they could easily set back 25 percent or more in conjunction with general market weakness.

In hindsight we hung on to several weak stocks like Compaq far too long. However, the market seemed to offer grudging encouragement to the view that we were simply seeing routine corrections.

There is a case for retaining strong stocks. The risk is, however, that they could set back a very long way indeed before generating sell signals. The general market is so expensive that a setback of 25 percent, down to the October lows for the Dow, could occur as a matter of course. Stocks in which there are huge profits could easily halve without damaging their long-term bull case. There is an enormously greater probability of stocks halving from current levels than there is for even the strongest stock to double again from current levels.

There may not be a major downdraft but if there is one, we shall have money with which to buy stocks at much better prices. Meantime, you do not lose money holding cash or T-Bills. You just have an opportunity cost.

Below Is Our List of Short Sale Recommendations

Futures

Sell 1 contract June Russell Stock Index

This represents about $200,000 worth of underlying stock. Each full point change (from 400.00 to 401.00) is worth $500. A futures broker requires about $12,000 to carry this trade. Selling futures is an option for protecting profits. However, individual stocks that have gone up a long way could fall harder than futures in a general market decline. For example, the likes of Chevron and International Paper have less downside risk than Amazon.com.

A closer hedge for holders of high-tech stocks can be achieved by using the NASDAQ futures contract.

Stocks to Sell Short

These are stocks to sell short, all in already confirmed bear markets and having significant downside potential with acceptable upside risk:

Minnesota Mining (MMM) $69.81
This is the most bearish Dow stock chart.

3 stocks related to building and/or construction:

Armstrong World Industries (ACK) $45.89
Clayton Homes (CMH) $10.69
Toll Brothers (TOL) $18.50

Corel (CORL) $2.59
This company is a candidate for bankruptcy or at least a further halving in the current stock price. There is a low risk of a takeover bid.
Below is the list of our previously recommended stocks with their initial buy prices. They are all still recommended for new money except APCC.

Current Recommendations:
(Entry Date, Entry Price, Last Close, Code, Name)

SELL 99/01/05 54.55 64.89 AHP American Home Products
SELL 99/01/05 106.81 77.56 AMGN Amgen Inc (split on 99/02/26 2:1)
SELL 99/01/05 50.13 31.56 APCC American Power Conversion
SELL 99/01/05 37.08 42.16 BCE BCE Inc #
SELL 99/01/05 26.06 20.00 COGN Cognos Inc #
SELL 99/01/05 42.47 30.66 CPQ Compaq
SELL 99/01/05 71.98 60.70 GLX Glaxo Wellcome
SELL 99/01/05 79.63 83.69 GNE Genentech
SELL 99/01/07 69.86 70.23 HWP Hewlett-Packard
SELL 99/01/14 39.50 31.38 LEVL Level One
SELL 99/01/05 41.44 48.50 NCR NCR Inc
SELL 99/01/07 19.44 26.19 NOVL Novell
SELL 99/02/05 50.52 59.91 NT Northern Telecom #
SELL 99/01/07 45.25 27.56 ORCL Oracle (split on 99/02/26 3:2)
SELL 99/02/05 78.75 78.75 PMCS PMC Sierra
SELL 99/01/05 64.55 83.27 RTRSY Reuters
SELL 99/02/05 32.31 28.52 SFA Scientific Atlanta
SELL 99/01/05 91.00 48.07 SLR Solectron (split on 99/02/24 2:1)
SELL 99/01/05 89.50 100.38 SUNW Sun Microsystems
SELL 99/01/07 32.13 28.94 SLVN Sylvan Learning
SELL 99/01/07 90.03 100.36 TXN Texas Instruments

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