The technical damage taking place in the current market environment is so extensive and pronounced that rallies are going to be selling opportunities for some time to come. With that said, it becomes incumbent on market participants to develop a means of gaining alpha in the midst of chaos.
As usual, the answer to the question of achieving alpha is a simple one. Of course, execution of the strategy is another story that has far too many variables to go into here.
This environment will, very simply, reward those who manage to:
- Avoid exposure entirely
- Pick select names having fundamental attributes that prove so overwhelmingly positive that the market recognizes their value
- Add short exposure
The old 2016-2018 methodology of picking momentum, growth and/or whatever is popular among investors at the moment without regard for quality, analysis or rationale is dead in the water. This effectively means that trend following, which had knowingly or far too often unknowingly, become the default strategy of most every fund manager out there is also finished for the foreseeable future.
The remainder of Q4 and the first half of 2019, at the very least, will look nothing like what investors have become accustomed to. The methods to achieve returns will have to be modified.
I've opened up the scans to short selling opportunities on future rallies in select financial, real estate and related names where I feel a tangible edge exists to merge technical and fundamental data points moving forward. New long opportunities are shot for the time being.
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