Harvest Time?

As we roll into the close of 2015, it has been a flat year in the SPY.

If you have losing positions, you are likely being advised by your tax adviser to harvest those losses to offset your realized gains.

This same conversation is likely occurring in every office that manages money.

Use this to your advantage for planning your investments at the beginning of 2016.  The wave of selling at year end 2015 will cause some stocks to get short term oversold, meaning there will be a capitulation move among stock holders.  They will finally give up on the slope of hope and bail.

When the selling stops, buyers will move in to get the bargains.

The risks of taking advantage of this opportunity include a 30 day wait period preventing the 2015 sellers from buying back in to the same positions in 2016, keeping prices down.  If the stock or ETF is heavily shorted, the closing of those shorts in early 2016 may offset this phenomenon.  The short covering may actually fuel a stronger bounce that gets further momentum from the 30 day period wait on the part of some buyers.

There is also always the risk of overstaying your welcome on a bounce from an unloved stock or ETF.

On the other hand, winning positions tend to get some selling in January, once the tax liability of the previous year is passed.  This yields opportunities for bargain hunters as the institutional profit taking leads to price declines in winners.  Look out for those opportunities.

If you buy and hold, these strategies are not for you.  If you have some taste for volatility opportunities, a flat year on the index can still be profitable.



Thrilling, isn’t it?

If you are feeling scared this morning, you are in good company.

The market as judged by the SPY is on the verge of breaking down.  The IWM is weak.  Commodities prices do not encourage a bright short term future.  Technology is running out of steam if you look at the QQQ.


Is it fear of interest rate hikes to be announced next week?

Are fund managers just waiting to see how their peers react after the big announcement?

Are institutions just getting light to avoid the uncertain risks of the coming weeks?

Are investors thinking the bull run is over as signaled by the leading indicator of crashing commodity prices?

I have a secret for you.  Listen carefully, and listen well.

Nobody knows.

The ONLY thing that matters for short term money is price direction.  You cannot make money if you sell at a lower price than you bought.

I will take my lumps and take some losses by closing some positions to the long side, particularly my small cap holdings, if the market does not rally hard with conviction today.

Faith is a bad idea in the market.  Be agnostic and follow the plan.



Target Rich Environment

Watch the video for a complete analysis.  I am net long the portfolio in specific sectors such as financials and technology, while I am hedging the uncertainty with cash and shorting the SPY.

The market has several conflicting indicators that will support a case for a move higher or a move lower in the short term.  Very murky to my eyes.

This should be a very fascinating and profitable year end if you are careful to define your risk.