MLR - The Most Challenging Market in One Hundred Years?

Published : June 3 2011 at 13:30 ET
The Most Challenging Market in One Hundred Years?

With today's employment report showing employment back up to 9.1%, there is growing discussion about the possibility of a double-dip recession. The wrong-headed socialist policies of the Obama administration will come home to roost. Socialism never works yet politicians continue to practice it because it appeals to the masses thus wins votes. A double-dip recession with inflation should bode well for precious metals just as it did in the 1970s.

So far for 2011, price/volume seems unusually deceptive, and leading stocks that hold strong fundamentals often sell off hard when the major averages reverse even a couple percent. Most strategic investment solutions are flailing this year. One might ask what can be done in this environment which seems unusually challenging.

Indeed, current market conditions are challenging. The market has not had any sustained rallies since the start of the year, and when the major averages drop just a couple percent, some leading stocks tend to get clocked to the tune of 5% or more. Furthermore, certain leading stocks had spin outs such as JAZZ on April 27 when the stock got throttled intraday. Thus this environment is fraught with higher than normal risk.

Fortunately, such periods eventually come to an end, and a new trend emerges when most investors least expect it since the market likes to surprise the masses. It is during such periods that it is best to stay vigilant and watchful of market conditions since markets can turn on a dime. New trends, either up or down, can begin with only subtle warning that calls for strategic investment management.

But instead, many investors stop trading altogether when the market falls, and take their eye off the ball as bear markets are notorious for pushing away many investors. While staying out of bear markets is a good strategy, one should still keep their eye on the markets by running screens and keeping a watch list of stocks that may be bucking the downtrend in the general market. We maintain such a list then when the market direction model switches back to a buy signal, we send out reports in real-time so members can choose to act on any stocks that are issuing pocket pivot buy points which can then be bought. These are often the stocks that well outperform the major averages during the next uptrend.

Investors must absolutely understand that often, the next bull market's big leaders and hence best investment opportunities show their first positive characteristics during a market correction or outright bear market. As the market goes through its paces, declining as much as 15-20% or more during a bear phase, future leading stocks are often building sound price/volume bases at the same time they are steadily showing improving fundamentals, such as improving and/or accelerating earnings and sales growth, improving profitability, and an increasing institutional following. Pocket pivot buy points are often early clues of potential future strength in nascent leaders, and our Pocket Pivot Alerts service keeps you in tune with those stocks showing the most favorable price/volume characteristics in any market environment and often constitute our best stock picks.

Further, many investors fail to realize that good money can be made on the short side, especially now that many inverse ETFs exist that did not exist three years ago. And time value on the short side is enormous since general markets and stocks tend to drop much faster than they rise. Such is the emotional nature of fear vs greed/hope. The tricky aspect of shorting stocks is timing. It is best to test the waters with a smaller than normal position, then add to the position as it proves itself on a price basis. We assist members through these treacherous waters via our Short Sale Set-ups reports.

In this current trendless market, the only positions taken in larger size were those that continued to move higher, so position sizing/money management techniques played an important role. Buying a smaller than normal position on the first buy point, then subsequently small positions on subsequent buy points puts the average cost at a lower level than where the stock is currently trading, thus the investor can add to their position with psychological ease. Strategic investment management is paramount.

We patiently await the next big move in the ETF and/or stock space, and will advise members accordingly. Initial positions should be smaller than usual, then pyramided into once proven on a price basis.

This information is provided by Virtue of Selfish Investing, LLC (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing, LLC. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2016 Virtue of Selfish Investing, LLC. All rights reserved.