Range Momentum

Stocks and indexes so far this afternoon reversing the downside action of yesterday.  Much of the trade has been like this with momentum nerds continuing to dominate daytime action.  Greek troubles will play with prices but it is hard to get the bulls into a corner.

Tech stocks such as AAPL, cash giant machines, with overpriced stocks to accommodate all who wish to enter,  have event price spreads nearing one and half times value.  There is not enough money in the system to pay off all the longs and some will have to eat at cheaper prices.  If you paid, or better, lent AAPL 110 at the beginning of  the year, you our now looking at 19.5% return and a 370% return since Jan of 2008.  Cheerleaders waving the AAPL flag forecast much higher prices but always have that upward stare.

Economic growth remains dull but Fed is determined to raise rates unless they can find another excuse to keep assets juiced.  

A CoverRisk.com  indicator for determining downside potential has reached the strongest level since May of 2008.  In fact it was seven years ago on May 19th, 2008 that the SP500 reached the highest price it would hit for the rest of the year.  While the indicator simply measures  the spread between various upside scales, it has only been this high on one other occasion which was proceeding the break in 2008.

The Four Quarters of the Apoclypse

Data from CoverRisk.com

Market Test Ahead

Markets have been a bit more volatile in the last couple weeks.  Today's job numbers was taken badly and may indicate some Monday downside.  The trend is still favoring rewarding the bulls with a better chance than even the market will see higher prices.  However, there is a test on the downside yet to come with the SP500 spot testing 2000.  A broad failure there would be the end of the secular bull trend of the last six years.   An offense strategy right now would be to dump stock positions in the coming days and wait till there is some recovery in interest rates since the current sell off in the bond market is an indication there could be a large hole below the waterline.  Interest rates should be going up to meet the Fed tightening and they are doing just the opposite.  Gradually higher rates would ultimately bring new stock market highs.

Improving Your Chances of Never Have A Losing Year

If you are a manager and your strategy has ever had a losing year, why would anyone ever give you any money?  If you are a private investor and your general overall retirement fund of which you have power over has ever lost money, you need to find someone else to manage your affairs.    If you are an active trader, professional,  then you probably should never have a losing month.

If you are an strategist manager, rule number one is never have a losing year.   Sounds tough because even the great brand name investors have had not only down years but really bad down years.  Remember however, guys like Buffett, while value investing for the long term, they are really brand name savers.  If you are willing to hold a stock over a long period of time, up year and down year, then you don't understand risk and do not care if you an alternative upside opportunity even exists.   You are thus committed to "hoping" as the vast majority of stock holders are and inevitability reliant on massive intervention from central banks to make you good because the reality in today's world is that buy and hold investing is a fallacy.   From AAPL on down, ultimately you are going to have that really bad year. 

It has taken zero interest rates for seven years to support your stock portfolio.  Over the same time there has been almost no real growth in the economy, fewer employed, and an absolute fear of it all falling apart in we cannot revive our once dreaded enemy, inflation.  What's worst, the investing industry has now created the ETF trap where seas of predominately passive investment vehicles have been created to primarily capture the sales transaction for their hosts while offering little in the way of investment opportunity or protection. 

What's one to do?   Hold stocks for a short time horizon regardless of the tax implication. If you are worried about the taxes and not about losing years then you will never get it anyway.

Find great index managers providing absolute return strategies without ever having a losing year.
Find managers that have strong compound returns and can tell you what $20,000 would have done after a year or five years, and not based on some VAMI metric. 



More to come.

Least Risk Stocks of the Q8

February had a volatile trader's beginning but has ended as quiet as any action has been over the last seven years.  Valuations for stocks are stretched and the bulls just keep on explaining the upside as a series of fundamental equations.  The Fed is about to start raising rates and only an equities break of 15% or more in Q2 will stop it.  Top dogs such as AAPL remain over valued but continue to see little in the way of pressure as the hedge fund industry wants to accumulate on each pull back.  That of coarse could be bad news for AAPL as the hedge community struggles to break out of an almost perpetual under performance cycle against nearly every benchmark.  

In CoverRisk's Q8,  MSFT has the worst overall price risk rating with PFE the highest in the least risk category.  Last years least risk stalwart, GS, has entered the bad zone with BAC and F finishing the dark side.  AAPL, GOOG, and IBM are in the least risk zone with PFE as of today's action.

Unchain Unchanged

The year has given both bulls and bears reason to hope given the volatile crossing back and forth over this year's unchanged line.  The 10 year at first continued its bull move but now has recovered as rates have risen slightly after two encouraging job reports. 

It is easy to be suspicious of any continued bull trend given the age of the stock rally. Just like all of last year, indicators from CoverRisk.com again show up as the trend, though there have been some sell side indications.

AAPL still remains the most overvalued stock but has consistently remained in the CoverRisk metric of least risk.  Yes, a stock can be over valued and have least risk bias based on day to day metrics.  However, when AAPL finally turns, it will go down and catch its tail, right now a 40% decline.  No stock ever escapes, just a matter of when.  Why won't matter but will probably be inaccurate. 

IBM Reported To Take Drastic Action

Well the stock defenders at IBM hope they have found a better way than stock buy backs to impact their stock; fire 26% of your workforce right now.  The stock has declined to a near fatal level that if continued would have confirmed a major bear downtrend according to CoverRisk.com data.  This action certainly seems a bit spooky and not what the job growth forecasters might have in mind, but we now live in the world of rapid scramble job elimination fostered by the Tech world.  Maybe great for stock prices, but bad if you want to eat.   

ECB Caves In On Stimulus

Takes a promise of one trillion euros from ECB to get SP500 index up and into positive territory for the year. Over valued stocks such as AAPL and critically ill ones such as IBM have struggled this year with share buy backs being their only friend.  Central bank subsidies are now the greatest generator of stock returns as a world wide broken economic systems need constant life support to delay economic downturn.   

IBM Confriming Death Dive For Other Stocks?

IBM again slaughtered.  Share buy backs will reappear to try to stem the over the cliff potential.  The implication for other stocks in the world where game decisions strategies play the most important part in determining stock price value, little to do with fundamentals,  is huge.  APPL, probably the most over valued stock in the world has a Qriskvalue of around 60.  Now players are not easily budged and it is still ranked according to CoverRisk.com on the lower end of risk scale based on current scoring, but that can change in one day.