Stocks getting walloped (again). Is the bull market over? If so, is the stock market telling us the economic cycle has topped and we’re heading into recession?
I’ll be the first to admit that while I take a lot of pride in having launched a tech hedge fund at the bottom in 2002 and closed it in 2007, trading stocks for TV as I repeatedly told my viewers back on Happy Hour, and then got wildly bullish and long for the App Revolution/Largest Stock Market Bubble in History in 2010 and 2011 — that I have no crystal ball to answer such questions definitely and I’m like anyone who owns stocks on a day like today — a bit worried about those very questions as stocks fall, many to new 52 week lows. As you know, I’m not worried about my performance relative to any index, I’m just trying to protect and grow my capital, my career and take care of my family, as you guys know. And since my career and money circulate around economic and stock market forecasting, I most definitely want to make sure I’m right about the economy and the overall direction of the stock markets.
So with those Tale-Tail Heart questions ring in my head, I look at how my biggest three positions, Apple, Google and Facebook hold together my portfolio, despite the dropping prices in some of our other, smaller positions like Sandisk, Synaptics and Twitter. I try to console myself by remembering that we bought Sandisk and Synaptics originally at even lower levels than today’s quotes and we’ve taken some nice profits out of all three, including big profits on Twitter when it was up (on the same day as taking big profits on SYNA coincidentally enough), but I’m disappointed about how far I’ve ridden the remainder of those positions down from their highs.
The playbook we’re following doesn’t include trying to catch the exact top or the exact bottom, but that doesn’t mean I don’t wish I had. Let’s go back to a few months ago when I wrote two months ago when I wrote:
We have a lot of stocks up big today, which has been a recurring theme for our portfolio during earnings season so far. Many of our biggest positions are at or near all-time highs. If you haven’t done any trimming, consider doing so. Maybe 10-20% of some of these biggest winners or about that same amount of some of your most recent big winners.
It’s easy to get carried away in the momentum and to start feeling invincible when so many of our stocks are so far outpacing the broader markets which have been struggling all year. In the Trading With Cody Chat Room today, there are a lot of comments like these:
- $SPLK breaking out.
- LOTS OF THINGS WORKING WELL we have had great timely trims and great timely buys overall YTD.
- Good trade on AMBA
- YTD has been nice
- Sounds like your YTD performance is outpacing that of the S&P!
Just a reminder that it’s better to sell when you can, not when you have to. And on that note, I also noticed that my ratings for most of our long positions crept lower this month, as most of our stocks ran higher.
Fast forward to today with the DJIA down 200 and hitting 16,000, it’s a good thing that the TradingWithCody playbook has held together like it has, as we consistently trimmed our long positions and reduced the number of long positions and took money out of the markets. Looking back, I’m dismayed that I didn’t sell all of our Sandisk at $100 (though we did trim) or so many of our others that have taken hard hits since the (at least short-term) stock market tops were put in and everybody felt brilliant.
Since those heady days from earlier this year when the markets bounced along at all-time highs, I’ve been patient and waited for some serious market sell-offs as I’ve been starting to scale into more long exposure. But I’m far from being aggressive in the stock market and in some ways I’m probably far underinvested in stocks relative to my income and my other assets. I do think we’ll see DJIA 20,000 before this bubble-blowing bull market we’re living through is entirely over. Corporate earnings are such a focus for all policy makers, the Federal Reserve along with their laser focus on the stock market itself, even going to the point of chastising China for not handling its market crash better. But that doesn’t mean we won’t see DJIA 15,000 and/or more panic sell-offs before then.
I’ve nibbled on the names I want and added SIMO as a play on the Wearables and Internet of Things revolutions to the portfolio recently and while the markets are down big again today, I don’t see any of my stocks that scream at me to rush into more. One more whoosh down, maybe a -500 day on the DJIA or something with another wave of panic selling like we had back when we were able to sneak and add to our Apple, Google and Amazon longs back when they got crushed on that -1000 day on the DJIA a month ago — and I’ll likely step up and buy more aggressively. No trades for me today so far though.
We’re having an intriguing debate about the oil/energy cycle over on Scutify today. How long will it take oil and energy to bottom?
Oil was down 4% yesterday and weak again this morning. Oil fell and it can’t get up. I’m still at best agnostic on energy. I wrote this back in January when the oil crash was still just getting started: “However, as I keep pointing out, that can take years or even decades to play out — it’s not like all those unfinished hotels, apartments complexes and subdivisions will instantly be put back on the board as if they were Monopoly buildings. We’re right now, as I calculate it, about six months into this oil/energy collapse. I’m in no rush on energy.” So we’re a year into this oil/energy collapse and I still think it’s at least a decade before oil truly rebound. I think there will be a slew of energy company bankruptcies before oil/energy truly puts in a bottom.
In the meantime, I see at least two major new Tech Revolutions to get in front of, as outlined in the latest Cody Underground. Brian Bain interviews Cody Willard about how Cody finds stocks, how he decides to pull the trigger, how much money to allocate to each position, how to find the next Apple, Google, Facebook and what’s the next big Tech Revolution to invest in.
Thanks and don’t forget to download the Trading With Cody apps for iPhone and Android. Just search the App and Play stores for them.