Saturday, January 5, 2013
LIFE AFTER THE FISCAL CLIFF
Every year there seems to be some large obstacles to overcome to set the market back to a bull run. There is a lot of speculation as to what the main catalyst will be but in the end no one seems to be right. I read a lot of analyst coverage and have BNN on screen more than my wife likes but I still haven't found anyone who is nailing it. For the next 90 days we may be asking ourselves if we are better off with the new deal struck in the USA. We seem to be witnessing a lot of money entering the markets that ran away at or ahead of tax loss selling season. This may be a short lived honeymoon phase as we could see analysts start to question how the US will deal with so many issues that were left off the table.
Obviously none of us want to go back to a nine to five job and would rather tough it out looking for the next ten bagger but they are not easy to find. When I look through the financial news I find so many opinions on where the markets are headed and how we should all prepare so that we can cash in. This tells me the basics for strategy are as diverse as the systems people use or instruments to make money. It reminds me of a scene with Eddie Morra in Limitless where he rambles on so many scenarios to prove to others he has a system but can't put his finger on it since no single thing on its own makes sense. We may have to rely more on what we identify ourselves instead of waiting and getting caught in something that is not a good fit. Always conduct your own due diligence and trust your own instinct to move in and out of a position. Your never wrong when you take profits.
I am constantly going over stocks in different sectors looking for that Eddie Morra pattern to emerge. The problem is it's hard to factor in promotion against the true value of news to the market cap. The guys I know who are day trading right now and making good money are following the hype story of the day and hoping to get in early. Once the herd arrives the longs tired of the story are starting to realize this is all false hype and that's when the promoters are dumping. Now we have a chain reaction in reverse and the only ones left on the bullboard are the retailers who outsmarted themselves.
It's always fun to go to the hype of the day story after trading closes. The guys still posting are trying to figure out why the stock is down now and where all the positive posters went. Obviously there are some real stories in there that are rumour driven and when the pressure builds this causes hype and the whole chain of events happens but the stock does not retrace at the end of the day. That is the key here. If your stock makes a total reversal hours after a visual bull run then you may have to cut your losses before this implodes. Even good news can have a 72 hour shelf life in this economy and its important to know when a long run is coming versus a short hype run.
In the past I have seen several stories emerge where a company has finally met its goal and achieved a significant milestone everyone has been waiting for but the stock is slowly creeping down. This probably means some longs are tired and want to take profit off the table but so many see this as the top or as good as it's going to get and they fall into the sell mode even though they aren't up that much yet. Then a week or so later people come to their senses and start buying like mad.
Always make sure you have read and fully digested the news and its full implications on the company's future. The hype will tell you win-win but the reality says short term spike. Or to the contrary you skim over the news and read into the negativity only to later realize this is a monster story about to break out well beyond your original target price.
The past week I put out my top 10 watch list for 2013. Some companies and investors contacted me and wondered why certain stocks did not make the cut this year since I may have been actively following their story the past year or two. For me the point of a new watch list is to bring to light some new and fresh stocks that may have been overlooked by the markets. Most, if not all of my past picks are still on my watch list and I still try to update my readers and post current company news.
at 7:40 PM