Monday, March 17, 2014

Reversion To The Mean

A non trending whipsaw market is not my favorite environment to trade in. It could and may get worse. I want to see a market with leadership stocks plus many others making new highs. I do not want to consistently see failed breakouts and illiquid trading controlled by the machines. Every time the market rallies it hits the wall and falls back. Every time the market sells off, it gets oversold and some catalyst makes it bounce back. In the end we are right back where we started from 

But as Hyman Roth said to Michael Corleone about Moe Green:"  So when he turned up dead, I let it go. And I said to myself, this is the business we've chosen; I didn't ask who gave the order, because it had nothing to do with business! "

Like Hyman we chose this business and right now things have gone sour.  Also like Hyman, the current foreign affairs environment has nothing to do with out business but it is telling me to trade fast, take advantage of events, know the world's financial situation as best as you can, listen to the smartest foreign policy people you can find and make you list of great stocks to buy. But don't buy them. Rent them and kill them fast.  And don't invest in emerging markets like the BRICS (and Cuba?). We retell the wisdom of the bad guy Hyman because he knows how to go with the flow and do the hard things by staying disciplined.  The key to the market "business" situation in 2014 to date has been to see that it has been a bunch of back and forth whipsaws with stocks going nowhere when all is said and done. So maybe today's bounce will continue a while. The question is when will this pattern be broken?

Today the market finally bounced after several dark days generated by things in Ukraine, and weakness/ troubles in the BRIC economies. I have no clue as to how far this bounce will go except to say that until I see market leaders come to the fore, this is not an investing environment, unless some extraordinary stock comes along. As is typical, rallies usually start with short squeezes. Note how the market went sideways after the opening gap up rally.

I have read as much as I can about the situation in the Ukraine and far more on foreign affairs. My summation is that Obama is a disaster in foreign affairs, but Putin does not have the strength right now to be too much of a threat. It seems that Putin has won in the Ukraine and Obama's after the fact half assed blustering are face saving blusters. It also seems that just like we have a Monroe doctrine in the Western Hemisphere, Putin believes he has the equivalent in the Crimea. And all kinds of yakking by Obama is like the boy who cried Wolf. No one believes him. This latest chapter in Russian adventurism may be over unless Putin overplays his hand and goes for all of Ukraine and its problems.

There are some good foreign policy articles that I read recently. They cover the entire political spectrum. I have re tweeted many. The thoughts of Henry Kissenger, Zbig Bryninski, Tom Friedman, David Ignatious, Charles Krauthammer, Condy Rice,  Jack F. Matlock Jr, and others are great places to start in getting a grip on foreign affairs. I don't agree with all of what any of them have said, but collectively across this group, one can glean enough wisdom and facts to get a grip on what is going on. And in this market, that was enough of an edge to get me to cover my shorts on Friday, but not enough to get me to go long. Although that thought occurred, risk aversion is everything in this market. Following experts like those listed above are all part of the game.

Here are some interesting charts:

GOOG One of the market leaders starts to bounce. how far will the bounce go?

GURE Great news after the close makes this China oil play pop. Trying to break out.

MOBI A strong stock pops a consolidation and then reports great news. I day traded MOBI for a nice win today. May be back in tomorrow.

PCLN Great company sells off with the market and bounces with the market. Great leverage in calls of high priced stocks because they trade like stocks with huge leverage.

YOD Small cap stocking popping from a secondary base?

Of course we can not avoid the macro environment today, so any trades will be day trades. I would avoid holding anything when Yellin speaks. Also, most of the world's major markets are getting beaten up. We seem to be the last one standing. I can not stress enough that until this market phase is over, this is strictly a day traders market for me. There may be follow through that turns many of the above setups into good swing trades or more. But who needs the aggravation of exogenous bombs when one can jump back in the next day? 

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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