Nov 16

Markets Quiet Before The Storm

The markets went up dramatically yesterday and today it is very calm and lukewarm. It does look like yesterday’s action was the recognition was that Clinton is going to win. I guess the question in everyone’s mind is what happens tomorrow – the day after the election. In general my sense is that the risk is still to the downside. There are several reasons for that. One is that Clinton wins but not with a good mandate. This could even mean (at its worst) a contested election result. That is a really bad situation for the markets. Of course if Trump wins all bets are off. If Clinton wins with a large mandate then markets could go higher.

Let us not forget that the general trend of the market is down. The SPY bounced but is still trending bearish. Same with IWM, EEM and QQQ. The XLF is showing signs of bouncing back towards a bullish trend but it is alone in that action. The XLV and XBI are still broken.

So, I am still hedged as I see the risk to the downside.

Oct 16

Short-Term(ism) may not be a bad thing

There is an interesting article in CNBC today that talks about a lot of things but mostly risk and reward. The article is┬ámore concerned about protecting one’s downside and how you can do better than inflation rate to be moving in the right direction. But do people (individual investors) really look at things in such a dispassionate way? The primary tendency is if you are bullish you buy and when you are nervous or (more likely) the market has tanked fear comes over you and you sell.

There are several downsides to taking a short-term approach to the stock market:

  1. You are liable for short-term capital gains
  2. You have to monitor the market on a regular basis

But you are unlikely to get caught in a “black swan” situation.

If you start with the premise that you don’t know what is going to happen to the markets tomorrow, you have a more “hands-off” and “mind-off” approach to the markets.

The premise for The Alternate Trader model is to stop predicting the market. To really believe that there is no way to know what is going to happen tomorrow. And let your behavior be completely driven by what the market tells you.