Wednesday, August 11, 2010

Market musings...

Not that my opinion matters, markets got killed today and the low volume saviors didn't show up.

I will say that on the way home today I was listening to Pimm Fox and his "taking stock" show and wouldn't cha know it...Bob Prechter was on spewing his usual shit and how he just called this top last week...(hat tip pennyman for the link)

Pimm of course didn't ask him about all the million other erroneous top calls Prechter has made in the past.

Last night I attended a not so useful discussion where Sam Stovall of S&P gave a talk about whether or not diversification failed. He says no, if you had a 60/40 mix of equities and would have only lost 13% or something at worse in the big bear of 2008.

But more of his talk was nice to hear. He mentioned statistics about the number of 2% days in market history...I forget the exact numbers but up until 1996 or so these events were rare...extremely rare.

Sam Stovall last night said that since 2000 we now have more than 2 times the number of 2% days on average per year.

Yesterday I got lucky and found an opportunity in ETP to go short something decent since I was totally exposed to the long side. This was a bit of luck, but also took guts...I can't remember the last time I put on a counter trend trade at a level close to resistance. I feel like this was one of my best trades this year...not so much because of the money involved, but because I acted on a good setup and knew to ignore new longs and put on a short.

In any case, after hearing those stats from Stovall last night, its good to remember that days like today are now becoming commonplace thanks to the computer trading and the Hal 2000s. Volatility seems like it is here to stay and this is the new normal. If anything is for certain this is it.

And for Sam Stovall to be preaching buying and holding last night...with this piece of knowledge in his head just made me less inclined to believe his philosophy.

I say this. Buying and holding is fine if you are a multimillionaire and have a small piece of your fortune in the market just to help pay for the servicing of your yacht and summer homes.

For everyone else, you best consider shortening your holding periods and using options to help cushion falls.

But today isn't that rare of an event anymore and we are now at a crucial support level, right now I am with Alphahorn...this is probably just another buy-able dip.

But tomorrow will tell us for sure.

1 comment:

  1. If gold goes up then the economy goes down. OH OH!!!

    I dont think there is an economic recovery coming. have a look at the guy who predicted the 2008 crash. He has been spot on with all this and it is very scary!!!! video =>