COULD THE VIX BE GOING INTO FLOATING DEAD RODENT MODE?
A few more charts here. We have the new high-new low ratio, which is a contrary indicator. When it's moving to the top of its range it acts as a more reliable version of an overbought indicator. Same with the other chart, which is the % of stocks above 200 day moving average. It's another version of an overbought indicator that points to the market overheating when it gets to historically high levels. I have found these indicators to work better than stochastics or RSI...or any of the millions of other indicators that make technicians salivate as they perform the visual optimization dance. I think the most interesting and telling chart of all, however, is the chart of everyone's favorite cousin the VIX. I explain this in the chart...but very briefly, just imagine a dead rodent floating down a very calm river...that may sum up the trading pattern in the VIX over the next few...
A LEADING INDICATOR THAT IS ABOUT TO HIT BRICKS
Bull markets always have leaders. Those names that are leading the charge forward...sectors that shine just a little brighter than all others. A majority of bull markets over the past 15 years or so have been led by technology. It is very true that when tech is shining, the bull feels that much more frisky and is able to take on challenges that it wouldn't be able to survive otherwise. Last night, we went over how bullish the Nasdaq looked and how it was poised to move higher. Today it had a bit of a run, which is good to see. But as you all know, we like to dig a little deeper to see what the technical picture is like within the Nasdaq. Where do you look for that? The good ol' SOX (semiconductor index). In any healthy Nasdaq rally and therefore, market rally...the SOX is leading the way. And you can see here, that if you would have just followed the SOX, which has been breaking out to new highs while the S&P, Dow and Nasdaq consolidated, you would have been able to see today's move higher coming from a mile away. Just as the SOX was warning the bears that the markets are not done on the upside just yet...they are getting close to a point where they are warning the bulls that we may be close to hitting a shit ton of bricks and our horns may not be able to handle the damage. It may get painful real soon. At a minimum we are in for an extended period of consolidation that begins at the earliest next week and at the latest towards the end of this...
MARKET TIMING? UMMMM
Um..yeah, we do that. Our micro-cap research is our bread and butter...that's where a majority of the money is made throughout the year. Keep following us and you'll understand why we feel the need to put our opinions on the general market out there for everyone to see. After doing this for as long as I have, I have come to learn a great deal about myself and my trading quirks. I know my weaknesses...and that is extremely important. If you say, "well, I don't know my weaknesses because I don't really think I have any". My friend, you're an absolute fool. The best and brightest became the best and brightest because they know how to reverse engineer their weaknesses to their advantage. Using myself as an example. I have realized that once I begin making an excessive number of trading decisions during a short frame of time, my edge gradually begins wearing off and I make up observations that don't necessarily exist. The constant strain of coming up with brilliant trading decisions, chips away at me mentally. Therefore, I have engineered a system of investing that can create returns that are better than a majority of active traders out there, without the need for my weakness to be exploited. It doesn't mean I won't pass the information onto you guys. You will see over time that the market calls that are made here are surprisingly accurate. Not always right...nobody is. But they can be profited from if trading over the short to intermediate term in the averages or using them for portfolio allocation purposes is your thing. The moment I start trading for myself and clients with my own market timing information is when you should stop following. I will dream up scenarios that will make mine and your head spin right off your neck and into your lap. I will simply stick to investing in names that are researched ad infinitum and produce gains that are second to none just by sitting tight. That's my thing. It's the way I sleep well at night, without exploiting a single weakness that has the potential to sink this...
THE MARKETS WERE BEGGING TO RUN, NOW WHAT?
If any of your senses were active, this rally shouldn't have come as a surprise at all. Come on...do I need to list all the factors begging for a move up? - Tech leading the rally...and not pulling back with the S&P, Dow. Bullish. - Commodities, which have been correlated to the equity markets, consolidating their gains in a orderly, disciplined fashion. Thereby telling anyone who bothers listening that the inflation or die trade is catching its breath. Bullish. - An abundance of professional traders putting all their eggs in the "market sentiment is too bullish" basket. Yes, it is...but it isn't gonna turn around on your clock. It's gonna do a lot of shaking and wiggling first. Pretty standard...and pretty bullish. - Doug Kass being bearish. He's very good...but in all the time I've followed him...he is ALWAYS early. Bullish. - The sentiment indicators that we follow (I will update these tonight) are just starting to get into the portion of the danger zone where the markets have a tendency to wiggle and shake in order to dizzy the bears. The market rarely flips the switch without putting on a soap opera first. Bullish. With that said...we are most definitely is soap opera mode. The market's are acting like they will go infinitely higher, when in reality, they are preparing to consolidate for a time once the January "I'm forced to allocate into stocks in order to keep my job" run comes to an end. I know of very few market runs that have topped in January...following a bullish year previously. This one isn't going to be the anomalous traitor that most seem to thing it...
THE PAYOFF COMES WITH OBSERVING WHAT LIES BENEATH
Look guys...it's really simple. You have a massive amount of newsletters that focus on the micro-cap/penny stock sectors that do nothing but pump names...try to extract money out of the market by, in effect, running a ponzi scheme of buy...alert your subscribers...start feeding them stock and then the last one holding the egg basket gets spanked. There is not another advisory service like this one out there today. We are not interested in pumping stocks or holding them for hours, a day or a week at a time based on technical patterns and pre-determined stop-loss levels. We kill the research...I mean our research methods are borderline insane given the lengths we go to in order to make sure we have the correct information. We don't stop at SEC filings...we look deeply into the executive officers and "activists" that are behind resurrecting the companies that we invest money in. We want to be 100%, absolutely, unequivocally sure that these guys interests are aligned with shareholders. When you have a distressed situation or an asset that is being spunoff, you rely on management to perform. In the case of distressed assets, when management is incapable of performing, activists get involved and then the fate of your retirement, vacation or kids college education money is reliant upon how determined and skilled these activists are. What these guys do at these times determines whether your funds end up at zero or you bring in a 500% gain on investment. The bottom line is this: when you invest in a distressed situation, management becomes your hedge fund manager. It's not gonna be smooth sailing and the fudging of some EBITA numbers that management at Intel or Coca-Cola do on a quarterly basis. Management and activists are gonna have to get creative...fight...form committees, appear in front of judges..litigate. It gets dirty...and if investor interests and management interests aren't aligned, guess what? The investment you made is done. We make sure everyone is on the same page. We make sure that the people fighting your battle are gonna put on a good fight. We make sure that the guy who just put up $20 million to provide the company some much needed capital knows what he's doing...and drives home in Bentley and not in the passenger seat of his mistresses Honda. We make sure everything is on the up and up so that we can hold onto a success rate that is greater than 85%. Meaning that nearly 9 out of 10 times that we invest money...we make money. If you like to wobble and weave around the markets like a kid who needs a dose...
PORTFOLIO UPDATE
Our technology reorg bankruptcy play hitting a new 52 week high today. About as pretty a pattern as one could have in a portfolio position. Very little day to day volatility. An absolutely stunning upward trending channel, with very little deviation. Still a double from here to make up for the unnecessary misery that was a nefarious bankruptcy process brought on by an incompetent management team that has since been ousted and replaced. While we have taken profits on a portion, we still hold a nice sized position in the company and will continue doing...
A COUPLE CHARTS THAT TELL US OF THE MARKET’S INTENTIONS
Click on the charts below to enlarge:
3 THINGS THAT WE DO EXTREMELY WELL
1. Find opportunities in micro-cap or penny stocks that are undergoing some form of reorganization. Investor’s have a consistent habit of overlooking these stocks. Institutions, on the other hand, DO NOT. But here’s our edge: Since institutions are, for the most part, unable to trade in the penny/micro-cap marketplace due to their large size…we are able to find names that are severely overlooked. Individual investors are simply unwilling to do the homework necessary to discover the value in these names. We do the homework, and we find names that have upside anywhere from 200% to beyond 1000% over a 1-3 year time frame. 2. Expert technical analysis of our individual holdings, as well as macro-economic indicators. The founder of Zenpenny has educated countless investors since the late 90′s with respect to technical analysis. Our technical views have a contrarian slant, and are unique in their interpretation. Given today’s environment where trader’s know nothing but charts, Zenpenny believes that you must take a look at the sky and be willing to see some green in there, despite the fact that everyone else only sees blue. We delve deeply into the technical side of things on a daily basis. 3. Be a contrarian. The financial markets are built on the ability to deceive, manipulate and make you believe in things that do not exist. You have to approach every single day as if it is entirely possible that your entire view of the current landscape has been altered by psychedelic mushrooms that were slipped into your morning coffee. We are constantly hunting for the contrarian angle on the markets. We integrate this in everything from our intensive fundamental studies of individual companies to the technical analysis we perform on a daily...