Morning markets want to reprieve from the pullback, at least fractionally.
Last month I wrote: “Near-term, the path of the least resistance in this market is now downward, and it could be a bad summer for the highest beta stocks. I’ve suggested trimming down your longs while they were at their highs, but I’m not looking to start buying very aggressively anytime soon. Let’s let the markets and its cycles play out and show us what pitches its throwing over the next few weeks. I plan on initiating a new long or two over that time frame and will slowly scale into some of my recently added new longs like Ambarella and IXYS.”
I am in no rush, but I will likely start scaling into a few of those purchases this week. I’ll use small tranche-buying approach, meaning I’ll buy small increments of about 1/5 a full position with each purchase in coming weeks.
As for the broader markets, Brian Bain asks “What is everyone’s view of where small caps will go next? Seems to be lots of fear regarding the stability of the small guys,” and in doing so makes a great point about the fear amongst investors and traders as the sell-off has gathered steam. That fear is especially pronounced in small caps right now. Lots of new fear out there regarding small caps, but as a sector I’m leeery. For one thing, it’s still a long way to up from last year’s lows and for another, I prefer to find some revolutionary stock picks individually rather than buying “small caps”. Your thoughts on the fear that’s building and who’s more scared right now, the bulls or the bears?
And while we’re on the topic of bubble-blowing bull markets vs. the near-term path of least resistance, Simon Constable’s latest scribe in the WSJ hits on one of the most important and overlooked topics every trader and investor needs to think about. Good article, good advice throughout it for all investors and all traders alike. ‘Failure to close a position within a predetermined time is one of the biggest mistakes a trader can make, says Mr. Willard. That’s when a losing trade gets turned into an “investment,” he says.’
In a similar vein, read the comments in this the video bashing me for explaining to Simon Constable why $AAPL was a screaming buy back at $70 in Jan 2013:
khoaiii 1.5 year ago “Glad I didn’t listen to Cody. You’re a moron”
Cucha 1.5 year ago “Apple has too much competitors. Sell it!”
Jeremy 1.5 year ago: “Sophisticated Investing?! This Cody guy doesn’t seem to know what he’s talking about.”
Be vigilant and be aware of your goals. Ignore the headlines and stick to your playbook. Steady as she goes, really. Bubble-blowing bull market is probably still on, but the path of least resistance for the markets for the near-term remains downward.