When you stand on the ocean shore and watch the waves breaking you might become aware that the tide is coming in or going out. It is a slow process to watch the water retreat and when it finally gets to its lowest point it is almost impossible to tell if it has stopped or will retreat further. Plenty of wave action, but going nowhere.

This reminds me of our current stock market. It still looks like the tide is going out because for the last 2 months all the major stock indexes have been inching down. Even the talking heads on CNBC are saying you must be cautious. They would be fired if they told you to sell. How can you tell what is gong on? Almost every analyst and broker looks at the major market indexes the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Index. On the surface they look very negative.

The DOW is composed of 30 large companies. The S&P500 has 500 companies of many sizes, but the number (index) generated is weighted by the size of the company. The bigger it is the more it affects the index. And the Nasdaq is smaller companies and have more of the high tech corporations that have been hit so hard and are still having mucho trouble. The professional traders and mutual fund managers relate more to the S&P500. Almost all domestic stock mutual funds have been lower in price for the first quarter.

Even though the S&P has been slipping it is interesting to note that 300 of the 500 stocks that make up the index are HIGHER. Yes, 60% of them have continued to advance, but it doesn't show - yet. When a market is changing directions it is similar to watching the tide stop going out and slowly change. That is what is going on now. The wave action is there, but you can't see that the body of water is now beginning to move the other way.

There are some strong underlying currents such and the Small and Midcap Value stocks, Real Estate stocks, the Leisure group and Financials. This applies to picking individual issues as well as buying mutual funds that specialize in these areas. If you want to be successful make money in this market you must be with the strongest group so you must switch from weak stocks and mutual funds to those that are currently strong. Fund managers tell you to look at the 3 and 5-year track record and "stay for the long haul". All that does is make money for him, not you. You must find the no-load mutual funds that are going up the fastest during the past 3 and 6-month time period and buy them now.

The only way to Buy and Hold is to buy and hold only while they are going up and to sell them immediately when they start to decline. Don't let the weak stocks or funds carry your cash out with the money undertow.

Al Thomas

Albert W. Thomas has spent most of his life in the field of finance. In 1965 he founded an insurance holding company, Security Dynamics Investment Corporation, after having been an agent and General Agent for several life insurance companies. In 1970 he became cofounder and president of Real Life Estate, Inc., that marketed a unique real estate and life insurance package.

After he became interested in commodities he bought a seat for his personal trading on the Chicago Open Board of Trade, which is now known as the MidAmerica Commodity Exchange. Later he became a full time trader and also acted as a commodity broker for a few select clients. By fellow floor traders Al is considered to be an excellent technical analyst much of which is outlined in his book IF IT DOESN'T GO UP, DON'T BUY IT! It became a best seller on Amazon.

In 1981 he sold his membership on the Exchange and with his wife, Carolyn, lived full time aboard their 41' ketch, the Aumakua (which means guardian angel in Hawaiian). They sailed in Florida and the Bahamas for two years.

He founded World Trading Group in 1984 that grew to the seventh largest introducing commodity brokerage firm in the U.S. with 35 offices from coast to coast, Alaska and Canada. It was sold in 1992.

Al is a graduate of Northwestern University with a B.S. degree in Commerce and is a member of MENSA. He is now president of Williamsburg Investment Company that syndicates his weekly financial column since 1999 to more than 300 newspapers and writes a financial market letter called Over My Shoulder that is quoted in Barron?s and many other publications. A 3-month trial subscription is available on his web site. He is a regular guest on several financial radio talk shows.

His favorite pastime is fishing.

Mr. Thomas is available for speaking engagements. Please call 321-453-5300 for more information.