Monday, March 24, 2014

Hot Potato - It Ain't Working Part Deux

Investors bottom fish at risk of your own peril. Traders if you must bottom fish, do so quickly into whooshes and sell faster. In my view, this is a very dangerous market. I have been warning people not to invest since the new year began. Now here we go again with another market trouncing in which the Down Jones Industrial Average - the only index that did not make a new high this year - was barely down and the only place to hide today. The NASDAQ 100 was smashed:

During this bull market to date, every big sell off has been met with a "V" shaped rally. The difference this year is that the "V" shaped bounces were not accompanied by sustainable new highs in the major indexes - see circled bounces on chart below. It also feels like the market is rolling over or in the least, is in a new going nowhere reverting to the mean phase. So will this time be different or will we get another "V" bottom? I don't know what the nature of this decline is or will be. Nor do I know if there will be another sharp bounce.

NASDAQ 100 Pierces Support With Mini Head & Shoulders Top:

But I do not have to know the answer in order to know that this market stinks and is strictly for fast day traders. This is not a time to invest. Even if I don't know where the market is going I do not need the aggravation of investing in it. We are in turbulent seas and may go nowhere or may sink if a giant wave hits us broadside. The name of the game is to stay afloat and day trade opportunistically if you know the game. As I said in my March 12, 2014 post: "It Ain't Working."

I have previously posted my special list of reasons why the market stinks. Here are some of the reasons:

1 - From QE to Taper in an unsure and slowing economic environment. This is the worst post WWII economic recovery. Is it ending just as the Fed stops it's ever diminishing returns from QE?

2 - We are not the only ones tapering. China's QE program dwarfed ours, but no one took notice until now. Now China is cutting back and letting financial institutions default on their debt.

3-  Yield Curve Flattening! What idiot is chasing banking stocks now?

4 - Sentiment Stinks! This is all the bounce we get with the $VIX? At least the Put Call Ratio has risen to 1.00.

5 - The new financial cold war may be starting thanks to Russia.

6 - There is a consensus that Obama is a weak leader who has no sense of geopolitics. We are losing the war against Iran, Russia, The Middle East, China, North Korea, and so on. There is an imposing realization that war is close to breaking out with Iran. To wit, Israel's current high alert preparation to get ready for war with Iran.

7 - Follow Through To Friday's Bad Options Expiration may have been at play.

8 - Europe and World's economies are not good. BRIC economies pathetic. China hard landing?

What To Do? Don't Follow Leaders, Watch Your Parking Meters or at least find Ginzberg

But seriously folks....Maybe there will be a whoosh down or a chance to trade the market leaders, but bottoms usually take time. Maybe new leaders will emerge. I would make a list of my favorite companies and wait for the right time to buy them. Here are some charts of stocks I am watching:

FB: I think that this growth spurt will continue, but FB is very high priced and vulnerable. Nevertheless, it is on my list.

GOOG: Greatness, fair valuation and innovation. It should be among the first to come back.

MONIF: Great chart set up. Some short term bad news yesterday about slower growth the next two months and a secondary - plus the good news of MasterCard investment.  But great news today regarding its mobile banking platform and users caused the stock to spike up from today's lows before fading:

PCLN A long term growth machine. Not high priced in terms of PE or PEG.

SGEN: The best of the biotechs not named BIIB, CELG, GILD, REGEN. Has a great pipeline and is growing nicely.

So if one is looking for reasons to be cautious, just ask your self, what is working and what happens to the money spigot when the yield curve flattens? It is time to be cautious and patient. There are great companies out there and the cream will eventually rise to the top before the entire market turns up. Look for strong stocks with great fundamentals or great "stories." Then wait. Your time will come. Now lets see what booby trap tomorrow will bring to screw up my thinking. I covered a small cap short via selling my long TZA this morning and am flat going into tomorrow.

BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.
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