Friday, March 27, 2009
Anti-Genius Formula (is in effect)
I don't like bold calls, so you may as well stop reading now.
But sometimes I can deduce strong potentialities based on observation and process of elimination. Today's session was a dusty jewel for me. A jewel because I figured out how to game this market next week, and dusty since my accounts gave back a chunk of this week's tidings.
First, I need to admit - I hear voices. In another room (the room where several caribou dry dangling in the pre-winter months) I have the TV on CNBC. I've tried every combination with CNBC (volume-off, w screen-on; screen-off w volume on; TV off all-to-god-damn-gether) and this is the best. I keep the volume at just barely audible levels and easily ignore 95% of the noise. However, if there is breaking news, a bond auction gone bad, an Airbus floating in the Hudson, an interview with Jamie Dimon which airs simultaneous to a breaking Bernie Madoff scandal and the futures are about to suck-out the tide in preparation for tsunami tselling, I get to hear it live (or close to live) and I measure the market responses on my screen to the tone of whatever the event. If there is an add for denture cream playing, where a host of drying weasels older than even me sing praises about their lack of oral ooze, I don't even realize it anymore. That stuff simply stores like bile in the deep reaches of my bitter being.
Today was a big CNBC day. Bankers were trotted-out for interviews following their let's-get-on-the-same-page meeting with O. There was nothing especially meaningful about that. Erin-somebody was lathered-up having the scoop of the hour with her own sit-down of the "team players." The especially-credible Bank of America ceo was mid-sentence burbling something about profitability, when he actually stopped himself (clever little pig) and said oh, it is too late in the quarter to disclose this. I guess that is how you suggest juicy good news, but you've really said nothing at all as far as in-house lawyers are concerned.
But something else today was money in my future pockets. There was a cumulative gem, whispered softly throughout the day and drumming passion into my brainpan by the end.
There was 5 and maybe 6 heads talking today with the same basic theme - that the market has had a dramatic rise, it needs to cool off some (which they say would be healthy) AND (here's the money part) they would like to buy the market on a pullback.
Well, arms to the sky for me. Not one of these guys mentioned buying today (on the pullback!), but instead they are waiting. This may seem minor to you, but it puts sugar in my many coffees over here. I have seen this so many times I can pretty much move to auto-pilot and reek out-performance. I can spend the weekend looking for leadership stocks and buy them moving higher. If those fools get their chance to buy lower I can sell mine down their throats and sell their asses short. I can wax my wooden teeth and use the denture ooze to wallpaper spare bedrooms.
If losers get their way and they can buy this market lower, well that is going to be a terrible place to buy and they will get wrecked; heads on a platter. At the same time, if they do nothing and the market keeps rising, they are going to miss out; heads down in disgust. You might be laughing, but I live for this stuff. This is how the psychology works in a strong market move (call it a bull trend within a secular bear market if you prefer, but it works for every strong move which has real demand).
A good market is not going to let you in and if you are simultaneously under-invested here + you refuse to buy the first pullback of a heated rally, the formula = you-miss-out. And if you get that pullback you are craving - boom! You're going to take a hit because the market is done rallying.
In other words, these brand traders cannot make money in this brand of market - thus, if he is in I am out and if he is still hoping for a pullback then I'm pushing for higher.
Real demand does not let you in easy. One has to pay (or cover short) at prices that feel too too high. If the market let's those on the outside in, well I'll let them make the money - I'm out of here (or getting short). But if the market is going to keep a firm bid, then the best cooperation this group is going to get is sideways action in the major's while the better stocks trend still-higher under the surface. In other words, they make no money even though the environment is great.
If you're short and you didn't cover anything today, then you certainly don't want to cover on further weakness Monday. Great old adage - if your head should be handed to you but it is not, then you are in the right place. But if you are hoping to cover lower on Monday and this market regains upward momentum, then I am going to push on you until I know you can't stand it any longer, and at that point you can have my shares (you'll need the rest).
I think I've repeated myself enough. I'll give you a break from here.
My bold call? Today was your pullback. The market is going to bid-up again beginning Monday, or at least churn quietly while great action in aggressive growth leadership resumes. Otherwise, if we pull back further and let these goofs get on board, well bar the door for whatever downside is in store, because we'll be finding out soon enough.
Cliff notes: How many times have we seen it? Those who missed the rally (or got caught short) and want to buy lower will not get cheaper prices unless the market is going to get cheaper still. Pay up for quality (today was the only pullback you should expect for now). And if things start to look like bargains again then this move is already over.
Note, here is the aggressive growth leadership list from 2 weeks back. I will update a new list this weekend.
Total Position: currently 2.6-to-1 net long, (83.5% invested)
Currently Long (according to size): MYGN, ARST, RJI, TSYS, PMCS, WNR, MNRO, SNDA, LFT, IOC
Currently Short (according to size): AXA, RSH, SRS-long (US Real Est. Dbl-short), EGO, ELOS
(Note: inverse-ETF SRS represents being dbl-short the respective index)