Covering High return Balanced Investing Strategies To
Make Money In Up Or Down Markets
A Publication of Princeton Research, Inc. (www.PrincetonResearch.com)
Contributing Staff: Michael King, Charles Moskowitz
August 14, 2016
Charles Moskowitz Discussion
Is it Getting Too Easy !!!
Week 32 had a loss of $298 bringing our YTD gains back to $6,415. We managed to lose money on both the long (AA) and the short (AAPL) sides. We still have our positions in HL (CEO on the radio on Tuesday) and long calls in both GLD and FAST. Funds in use are $1,337.
I know I’ve been harping on the A.A.I.I. sentiment numbers for a while now, but the chart on page 8 of the biggest movers on earnings surprises brings into focus what happens when you have the unusually high neutral readings (almost 40% over the long term average) with all the attendant cash sitting on the sidelines that it implies. The focus of most of the money managers on both earnings and dividends causes them to have to put money to work and with the markets at new all-time highs, nobody wants to be stuck on the sidelines without positions to justify their management fees. The most obvious place for them to go is into companies with earnings growth already in the books. Some of these moves are really extreme and while some may have also been driven by the short interest you can’t discount the value of not having to make even an informed guess on the earnings. Much of the list doesn’t have any meaningful dividends, but even after the surprises, several had further moves in the days that followed.
Back to the technical, after the breakout above 2120 we moved in a very orderly manner to 2178, we consolidated and worked higher, all above the 2120 area. After a small correction to 2147 we again broke to new highs and have spent the last 6 days consolidating above the 2170 area. This is a very bullish set of circumstances. It makes it look as if there is no need for quality stock picking, and that all you have to do is buy and hold. This is never a good thing coming into a seasonally weak period for stocks. The VIX is telling us that we have become so overwhelming complacent that no one needs any protection from the downside.
For this reason I am looking at the UVXY (extremely volatile) and the SPXU (slightly less so) and possibly some other short side positions. As asked above, is it getting too easy? generally not a good sign. This market can continue much higher, but “trees don’t grow to the sky,” feels like it is an apt adage for this market right now. CAM
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