The market was spooked Wednesday by North Korea's missile launches on Tuesday and by ADP's prediction of 368,000 new jobs in June. Investors did not want to see that many new jobs because it heightened the likelihood of another rate hike by the Fed. When they got the actual jobs report on 121,000 new jobs, stock prices went higher; then lower. What's going on?

It all has to do with unrealistic expectations regarding the Fed, interest rates and the economy. As noted in my essay of December 30, 2005, "The Year Ahead," the media and most analysts were quite bullish on the outlook for 2006. You may recall that I wrote about two "experts" appearing on CNBC late last year who were both bullish for different reasons. The first expert, who had predicted the NASDAQ would go to 7,000 in March 2000, was denoted as "Nincompoop A." He said the market will rise in 2006 because the economy is strong and earnings will continue to rise. The second expert, a perpetual bull, was denoted as "Nincompoop B." He said the market will go up because the economy will get weaker and interest rates will fall.

In reality, Nincompoop A failed to realize that the Fed will continue to raise interest rates and compress P/E ratios as long as the economy is strong. Nincompoop B failed to recognize that stock prices normally fall when the economy weakens. So today's market reaction of rising on news of the weaker than expected jobs report was based on hope that the Fed will stop raising interest rates while the economy is still strong. It began to fall on fear that the jobs report indicates the economy is weakening.

Clearly, the Fed will not stop raising rates while the economy is strong and the jobs report wasn't that bad given the slowdown in the housing sector. In any event, the desire for economic data that is neither too hot nor too cold is a normal condition of a classic Case 4 Bull Market Scenario. In this scenario, there's a race between rising earnings which drive stock prices higher vs. rising inflation and interest rates which cause stock prices to go down. This is a difficult scenario to deal with and many investors become frustrated when economic data doesn't evolve exactly as they wish.

As far as I'm concerned, I stand by what I said last year, "I expect 2006 will be a rough year for stock prices until October or November. Then the blast-off will occur. The rally will last until January 2008." In the meantime investors will be Betwixt and Between.

TEENY BOPPERS SC.
Two weeks ago, I wrote about Explosive Low-Priced Stocks. Last week, I commented on Firework stocks. Today, I'm going to write a few words about one of my favorite strategies, Teeny Boppers. This strategy is described in Chapter 16 of "Stocks, Strategies & Common Sense."

One of the things I like most about Teeny Boppers is that it finds potentially big winners in any kind of market environment. For example, it found both SOHU and SINA, two Chinese internet stocks, during one of the worst sell-offs of the recent bear market. SOHU went from $1.70 per share on June 28, 2002 to a peak of $42.68 on July 14, 2003, and SINA went from $1.75 on June 28, 2002 to a peak of $48.25 on January 26, 2004.

A key to picking great winners is that Teeny Boppers will find them over and over again as they rise in price. It found NTRI at $2.97 on December 3, 2004; then it found NTRI 14 more times in January 2005 as it moved up toward $5.00. NTRI hit a peak of $74.86 on May 10, 2006. I simply run it every night and pay particular attention to stocks with repetitive appearances. I also take a quick look at the graphs. I have found that stocks with smooth, explosive chart patterns have a better chance of turning into big winners. This assessment is facilitated by using RT and the Comfort Index, CI, in the sort. Therefore, I have been sorting Teeny Bopper stocks lately using VST*RT*CI Desc as the sort. I call this search, "Teeny Boppers SC" where SC stands for Supercharged.

A portfolio of Teeny Bopper SC stocks is being illustrated as this week's "Strategy of the Week." This is a great strategy and it would be well worth your time seeing how it works at the VectorVest University. So don't be one of those betwixt and between investors. Go for the big winners with Teeny Boppers SC.