TICKETS TO THE TRUTH ON SALE HERE
I don't care much for news out of Europe. In fact, the number of minutes I have spent reviewing the news flow out of Europe is equivalent to the minutes I have devoted to palming the tailpipe of Lamborghini Aventador after a 175 mph run on a racetrack. In both cases, I don't like to be burned. And in both cases, by performing a particular act you will get burned. Bias is a deadly psychological parasite that can reconfigure mental synapses in ways that are detrimental to investor performance. You don't realize it when you are partaking in the activity of simply digesting a news story, but biases are being constructed the entire time. The more talked about or legitimatized the story, the stronger the biases have the potential of becoming. If news, data and interpretation of what EU finance ministers say was a means of making consistent money in the markets your typical economist or academic would be high siding through Manhattan in a Bugatti towing a gold plated trailer filled with bikini clad South American models on his way to a luxury submarine outing. The Forbes 400 list would be filled with the articulate incompetents you see on CNBC daily that made fortunes simply interpreting news and then having the market do exactly as expected based on that news. News doesn't make you money. It makes you aware. It makes you a conversationalist. It is a form of ongoing education. It does nothing to benefit speculative activities in the financial markets. The more macro the basis for the article, the more useless it is to act of creating wealth. With that said, later on today I will be providing my weekly chart review that consistently assists those who are interested in finding an edge in the marketplace to do just that. Let the majority sink their teeth into the news out of Europe, grasping for an advantage in the marketplace that they will never find. Tickets to the truth on sale...
TODAY’S THOUGHTS: IT IS ONLY GOING TO GET BETTER
I commented earlier on Twitter how the past few weeks have brought a drought of new investment candidates. I have a fairly stringent set of criteria I look for in order to take the time to research, take a position and publish a report for your perusing. I take the time at the close of every trading session to go through a set of stock screeners searching for initial candidates to consider. This happens regardless of whether I am 100% long, 100% cash or somewhere in between. If I find a name that looks like it could be the next SYNC, AUTH or the many others that have brought in 20% plus gains this year, I'll begin accumulating shares. If I am bearish at the time - meaning my trend indicators are all pointing down - then I will put it on ice and wait for the market to become more accommodating before I invest. Either way, rain or shine, I go through this process each trading day. It takes one day of missing my daily routine to miss out on a potential 100% gainer over the span of a few months. The thought of missing such an opportunity, along with the excitement that comes with hitting a home run is what drives me. To this day, I still get the same feeling in my gut when I spot an opportunity that has profit written all over it. The feeling of excitement and anticipation never goes away. Neither does my hunger to win. If I can help you guys win or even better, help you LEARN to win on your own then my job is done. I hope that I have accomplished that to some extent over the past year and a half of keeping this blog. In the future, I hope to make it even better with more in-depth reports on individual stocks, as well as dissecting the markets in a unique manner that cuts through the garbage and arrives at the essence of price action. Price, volume and trajectory points are all that is needed. Clean, neat, simple and monstrously effective. I will be taking a look at the S&P 500 from a technical perspective in the review upcoming this weekend. It should be noted that the S&P 500 today bounced exactly at the crossover point of the generational trajectory from the early 1970s and the important trajectory born at the 2009 lows. This trajectory crossover point is what led me to believe that the bottom in the markets would be seen by Wednesday or Thursday, as noted in the weekend review. In the same review, I...
HOW GUYS WITH USELESS DEGREES AND AN INEXPERIENCED RETAIL INVESTOR ARE CREATING A BUYING OPPORTUNITY IN FACEBOOK
I have resisted putting up a dedicated post about Facebook. I didn't want to add to the already crowded field of Facebook and social media experts postulating about the future of the company as if they were sitting right beside Peter Thiel when he threw down the $500,000 that would eventually become billions. But today I had enough. I witnessed a sour-faced attitude towards the stock today that was completely one-sided, with very few individuals, analysts or responsible professionals looking at the contrary angle. I don't know how deep this hole that it is in will go. I do feel that anywhere in the 20 range is a good buy for the stock. With the mid-20s being extremely attractive. I'm not in the business of mega-cap names. If I choose to play social media I will likely gravitate back towards YELP, which thanks to the gods of risk aversion, I cut out of the portfolio weeks ago with a manageable loss. What follows are a couple illustrations that demonstrate how the financial markets have a difficult time initially valuing names that are impossible for those touting useless degrees and credentials to model a valuation. Their valuation models for names such as FB will always point to absurdly overvalued because these individuals, through their years of schooling, having learned that having vision...actual raw vision...is a liability and gets in the way of facts. When facts rule your life it is impossible to have vision about any subject, whether the future of a company, the economy or whether you will ever have sex again without pulling out an Andrew Jackson. So in one corner you have the useless degree types and in the other you have the typical retail investor who only got involved with Facebook because they saw the movie Social Network and spend an hour on Facebook revealing intimate personal details about themselves, like what kind of cheese they hate on a turkey sandwich or how the colors of the cake at a 3 year old's birthday party didn't match her mother's dress. With these two concrete pillars supporting your investment thesis, how can one go wrong? Here's how: The stock falls under the weight of both of these groups right from the onset and doesn't look back. I didn't realize how heavy the weight of the casual investor would be in Facebook until I, like everyone else, witnessed the free fall the company has taken part in since its inception. The guys with the useless degrees are putting together models that are calling Facebook overvalued. Meanwhile, you have a core group of inexperienced investors causing havoc with the...
TWO SIMPLE METHODS OF RISK-CONTROL EVERY INVESTOR SHOULD LIVE BY
This forum is constantly evolving. It started out as a means of finding undervalued micro-cap stocks that are involved in a "special situation." Over the months to follow, the website began morphing and I decided to simply allow it to take shape without any preconditions. At one point I began posting more short-term swing trades, eventually deciding to stick to what I do best -- researching and investing in small-cap stocks without the noise of much else attached to it. I want this over the years to become a specialized forum for sharing investment ideas, as well as general market thoughts. I'm not in this to gain tens of thousands of daily visits so that I can begin attracting advertising revenue, followed by appearances on CNBC and FOX News. What I do here on a daily basis has a niche. That niche is where I want to focus my efforts. Providing the best information possible so that over a significant period of time, everyone will gain. Those gains will come if there is discipline attached to what you do. I can provide top-notch analysis here on a daily basis, but if you choose to invest in a manner that only looks at reward without assessing risk then you won't benefit from what I am doing here. In fact, you won't benefit from any analysis whatsoever, regardless of its brilliance. Focusing on reward only without looking at risk is a disease for investors. Not having a strategy to get you out of the markets when the ground beneath you is disintegrating is a severe liability. One leads to the other. Meaning that those who focus on reward only won't have the sense to begin evacuating the premises once the ground beneath them begins to disintegrate because they fear missing out on the potential reward. This type of thinking needs to be abolished from your mental Rolodex of ingrained thoughts. In a month where the markets are down substantially, the current portfolios I manage are more or less unchanged. That is with the fact that I came into the month 100% long in volatile small-cap names. And the method for getting there is as simple a method as possible. It involves two distinct risk-control strategies that every investor should live by: 1. I have allowed trend-driven indicators to take me into a higher percentage of cash as the markets have weakened. This effectively cushions the blow of any downtrend. And if followed correctly, this type of method will take you to 100% cash ahead of calamitous market falls such as 2008. 2. I have kept the strongest names in my portfolio and sold...
SPIDER-DEMONS
During the trading day I tweeted the following: SYNC was initiated on March 29th. While I believe the upside remains substantial from here, my intermediate term trend indicator flipped to sell today. My job isn't to fall in love with companies based on my analysis. But rather to manage risk appropriately based on prevailing market conditions. I am in the process of liquidating and will have more reports tomorrow before the close. Currently, I am nearing a 50% cash position. It is always a difficult proposition to pick and choose between companies that you deeply believe in with every ounce of your analytical soul. I have, however, seen it too many times. When the market gets into THAT mode, it doesn't care about anything but devouring the hearts and minds of believers. It will take whatever faith you have in rational analysis - whether technical or fundamental - and turn that faith into your very own living nightmare. While we could very well be nearing a bottom for this move down, we are also nearing a point where things get dangerous. When that danger approaches you had better be sure you have a fortified plan in place to deal with the repercussions of a market that moves swiftly and takes no prisoners. I hate to bring up the Facebook IPO because it has become the only topic of conversation amongst every blogger, analyst and pundit since the IPO. I must, however, comment as there are some very real consequences for investors. First of all, I will say that I believe Facebook as a company will flourish in the years ahead. Their revenue models are literally in the first inning of development. They bring together 500 million people per day that spend more time on the website than any other. Whereas Google is a tool that you use to discover information, spending no more than a few minutes at a time on, Facebook is a destination. The uses of this virtual gathering place for all peoples of the world is just being tapped. It will take vision to understand and stick with the company as an investment. All those analysts who are attempting to gauge the company using traditional earnings models may look like geniuses now, but I assure you that they will look like fools in the coming years. Over the short to intermediate term what has occurred over the past few business days is nothing short of a disaster for both the market and the company. An already jaded retail investor that literally considers the stock market a playground for demons with suits and ties was gang-raped by them...
HAUNTING EMOTIONAL CONSEQUENCES
What started as a mild flu has officially turned into the beginning stages of a financial black plague. Looking through my various daily research points, there is literally not one thing to hang your hat on if you are bullish. All of my support areas have been broken. The most important generational trajectory of all in the Dow has been obliterated. The Facebook IPO came and went, resulting in thousands of articles, tweets and clever quips. But nothing of substance. All of the above mentioned dark clouds hanging over each one of our heads is absolutely 1o0% necessary in order to see that elusive bottom that everyone has been searching for. But hold on one second my fellow poopy fingered, bottom pickers. Just because the worst may be close to being over doesn't mean that a future of Sunny Delight, Raisinettes and juggling clowns awaits us. I published an important study just two days ago with respect to the velocity of fear. The study basically tells of relatively flat trading conditions with the possibility of further negative numbers over both a one month and three month trading period when fear develops as quickly as it has in recent weeks. And it makes perfect sense. Gradual fear built up over several months has the potential to be thought through, analyzed and ultimately dismissed as the data develops. As human beings, when there is a sudden onset of extreme fear, we are less likely to perform the proper analysis or dissection of pertinent facts, simply choosing to act on emotions alone. It is the difference between a burglar breaking into your home at 2pm, in broad daylight, while you cut carrots in the kitchen and see him crawling through your daffodils and a burglar breaking in at 4am while you are fast asleep. Both are frightening experiences. However, in the first case you have the opportunity to slowly build and analyze your fear, as well as your options, in order to come to viable conclusion as to what the best course of action will be. In the second case, the sudden spike in fear you experience will lead to more drastic and emotional decisions. Equally as important is the long-lasting emotional trauma that comes with a sudden spike in fear. What we have now is the equivalent of the 4am burglar. The residents of the bull market have waken up and will soon have the burglar hog-tied. However, the emotional trauma resulting from such an experience will remain with them. And this is confirmed by looking at the chart of the study into the velocity of fear. Here is the point...
HERE IS WHERE I STAND
At present I'm 75% invested in SYNC, AUTH, ATNY and GSIG. It is becoming increasingly apparent that my 25% cash position may remain intact for sometime to come. My short-term trend indicator is now firmly in the negative after flipping to the bearish side on May 10th. It would take a rally of some consequence to get it roll back over, allowing me to move back to a 100% invested position. Of some concern is the fact that my intermediate term trend indicator is 1-2 bad days away from switching to the bearish side as well. If this were to occur, I would have no choice but to allow this risk buffer to take the portfolio into a 50% cash position. My opinion of the market makes little difference when faced with my primary function, which is capital MANAGEMENT. Capital mismanagement means allocating down regardless of circumstances based on X, Y and Z. While this may work nine times in a row, it only takes that one time to blow you out of the water for good. I'll say it once again, you need a means of saving you from you. A risk management solution that makes sure you are around to fight another day. I went over this in detail some days ago. I am politely praying to the all-powerful market gods tonight that they allow me to remain 75% invested. Taking the portfolio down to a 50% invested position would require some very tough asset-allocation decisions as I strongly believe in the long-term viability of all my current holdings. I also have strong technical evidence that suggests a substantial bounce is imminent. I have made a promise to the market gods that if they allow the markets to bounce from here I will help a variety of hungry birds from all over California and perhaps stretching all the way into Nevada. I am of the opinion that they will take my offering seriously. I must say that despite the sell-off in the markets, the current portfolio has held up relatively well. This is mostly due to the staying power of SYNC, which released its 10-Q today. Worth reading if you haven't already done so. Their metrics are blazing a path towards some very real profit growth in the coming quarters based on the year over year numbers. Any further positive news out of the company over the coming weeks has the potential to take us on a parabolic journey as market participants have this company twisted. I spoke about it in detail over the weekend. That's all for tonight. Stay...
ADDITIONAL WEAPONRY TO CUT THROUGH AND CLARIFY THE CURRENT CONFUSION CONTAINED HEREIN
As all of my astute readers know, I have multiple reasons to believe we are coming up on what will be seen in hindsight as one of the better opportunities to allocate into stocks for 2012. Since we are nearing a point where smart play will rewarded through an abundance of profits, I am issuing this chart review as an addendum to the weekly review. Unfortunately for participants in the marketplace bottoms are typically violent and unpredictable affairs. They are by nature the point where the maximum number of participants begin an orgy of emotions that gathers steam until it converges into one single point of maximum anxiety where a reversal can take place. As you can imagine, given my description of such an affair, it is not something that is subject to simple interpretation. There is disinformation on both a fundamental and technical basis that is meant to throw your nose off the scent. Fortunately, during such times I become voluntarily illiterate, digesting as little information as possible so that it does not interfere with my tracking of the proper scents. Allow me to remind you of the fact that there has not been one important bottom in the history of mankind that occurred during a positive news cycle. They occur during periods of fear-based disinformation based on the assessments of those among us who are deemed experts. These are professors of disinformation who don't have a speculative bone in their body. There are no grey areas in their overly-contrived jargon. It is a black and white world that they thrive in rooted in data points that walk ass backwards sans pants. Not to be trusted, much less relied upon to enable you to thrive financially. Instead of feeding into the fear by attempting to translate information that is impossible to decipher accurately in order to generate profits, let us look at what prices and sentiment are telling us here and now: click chart to...
WHAT IN THE NAME OF TARTARUS HAPPENED TO SYNC?
A band of undesirables seems to have taken a hold of one of my positions and wreaked havoc on the share price. I speak of SYNC and the phenomenon of substantial volatility now becoming the norm for this stock. I spoke about this potential for a modified road map in attaining value last week. Despite the fact that I knew we would see volatility, when it actually takes hold and the reality of giving back substantial profits becomes, well.....a reality, I become unhinged and want to take heads. Before I get carried away with criticizing all the new patrons of the company I first discovered in late-March, let me put the past couple of weeks in perspective. SYNC was an undiscovered opportunity at the beginning of this month. Volume was no more than a couple hundred thousand shares per day. The message board was vacant, seeing no more than a couple posts per day and sometimes none at all. The Stocktwits stream was populated by myself and a few others who had discovered the name. Surprisingly enough, there seems to be individuals in the marketplace whose opinions are more valued than even mine. So much so that when they publish a research report on a company the dynamics of trading within that company are changed forever. At the same time, an entire group of anti-heroes becomes involved in the process, refuting the claims of the original publisher of the data, mostly based on concerns over the reputation of the one publishing the research. The classic war between short sellers and longs ensues. We are currently in the first inning of that war. It makes no difference who the antagonists and protagonists here are. It seems that instead of focusing on the company in question, the issue at hand has become who is driving the stock price? The only tangible difference, when looking back on SYNC a decade from now, the participants in the day to day movement will have is some extra zigs where there should have zags. And perhaps some extra zags where there should have been zigs. In other words, the path of getting to the pot of gold at the end of the chrome-plated rainbow has become much more nefarious in nature. It is not simply going to be straight line. There will volatility galore. As a result of the publicity that is aimed mostly at investor types who are far less sophisticated than any single person who frequents this forum for efficient exchange of information, SYNC has become filled with undesirables. Those undesirables, amateurs or perpetual loss magnets need to be dealt with before we can...
DO YOU HAVE A WAY OF SAVING YOU FROM YOU?
During the trading day today I tweeted the following: I'll explain this concept again because I think that it is the single most important component of investment success. You cannot simply depend on being a good stock picker to make it in this business. You must also have a means of controlling risk that is of your choosing and attuned to your tastes. It may be as simple as having a 5% stop below your entry point. It may be as complicated as a mechanical system with 18 separate parameters that take into account everything from price momentum to the current wind gusts in Santiago, Chile. Doesn't matter. There needs to be a system of controlling risk in place. My risk-management system triggered today. I absolutely hated the fact that it triggered and was praying that I would avoid it since the beginning of the week. It is no secret that I am bullish here. I think that we are about to see a bottom - perhaps by the middle of next week - that could drive this market substantially higher over the coming months. And that is exactly why I have this system in place: To save me from me. I'm not saying that my personal feelings about the market are incorrect or inaccurate. In fact, I am right more often than I am wrong. This site is a testament to the fact, as is my past history on Wall Street. When I am wrong, however, it always begins with the confidence I have right at this moment about the bullish outcome of the market from this point on. You don't fall into steep drawdowns by being indecisive about which way the market is going to go. You fall into a deep drawdown because of the fact that you unequivocally and without any doubts believe in your analysis. I am here to tell you that you need something to circumvent that belief. You need an interruption switch that gets you away from you at points where the danger is the greatest. This is coming from a guy who in his twenties blew up a hedge fund that had many millions of dollars under management and many more millions in capital commitments after finishing the prior 12 months ranked #1. I had a client base that other fund managers would kill for. I had the resources. I had the institutional support. I had the track record. I didn't have one thing: There was NO interruption switch. There was nothing in place to save me from me during times when danger was bubbling beneath the surface. So when I decided to...