Cody Kiss & Tell: A Euphoric Market, the Tech Rotation and Don’t Be “Ashamed” of Trading Mistakes

Here’s the transcript to this week’s Live Q&A chat. Join me next Wednesday at 2pm EST at http://tradingwithcody.com/chat or send me an email with your question at support@tradingwithcody.com.

Howdy folks. Let’s rock n roll. Ask me anything.

Q. I feel like Market is in euphoric mode now. Is it a contrarian indicator for the short term bear market? I was confused and holding off my temptation to buy SPY or TNA calls from Monday and market kept going up…….. hopefully its right thing to do? Thanks for your Wednesday chat sessions.

A. Congrats on your patience. This market does indeed feel euphoric, but as I’ve been pointing out, that euphoria and this rally can last longer than most anybody expects. I’m still quite net long and as you know I think this stock market bubble still has a ways to go, so unless you’re feeling like you want to hedge some of your long exposure or otherwise bet on a near-term pullback to catch some gambling-esque kind of quick gains, then, I wouldn’t do much to change your overall portfolio if you’ve been following my approach all along. Wow, long sentence.

Q. Thanks cody. So you are saying that you are still a bull till year end right as you said that this euphoria can last longer?

A. Yes, I think the ongoing stock market bubble is still going to blow up bigger. Near-term, or mid-term, this market could go much higher much faster than most anybody expects. It has been doing so since 2009, no? There will be a time to sell and get short. But probably not yet.

Q. Today’s BURST in tech higher for JNPR and CIEN are they a direct reflection of Adtran earnings or do you think the bottom is now in for these 2 and tech? Today for the first time this year if I am not mistaken ( need more data to confirm ) but tech is leading. Is the rotation beginning? I know you don’t mind waiting for the turnaround but do you believe it may be at hand?

A. Yes, it sure does feel like there’s a serious rotation ready to roll into tech. IF the market rally can keep going. By year end, I think tech will be the best performer in the broader indices, which I expect will still be up double digits. Or more accurately, I expect the indices will again have climbed into double digit gains for the year after a big pullback at some point long before the end of the year.

Q. Every day there are surprises in the market. Often there is something specific to account for the movement although it can be a rumor or an up/downgrade sometimes combined with an overreaction to previous day(s) market activity. When the market in a stock is moving quickly it can help to know the source behind the movement in order to control ones emotions and maintain emotional equilibrium. Is there any place one can look to quickly find timely explanation(s) for sharp movements in any particular stock?

A. Twitter is becoming a bigger resource for real-time news for both myself and for many traders. You don’t need to be active on twitter to surf the site and find news on your subject or stock even. Go here anytime and type in a search term and you’ll see the latest tweets on it with news links and what not. Type in $FSLR for example and you’ll see all the latest traders talking about First Solar the stock, FSLR. My twitter handle is @codywillard and if you’re a subscriber to TradingWithCody.com, you can follow all my personal trades in real-time by following @tradingwithcody on twitter.

Q. Hi Cody. OK…been avoiding asking this question…shame factor I suppose. What would be your advice should one have over-invested in AAPL during the pullback? When I say over-invested…I mean about 55% of one’s portfolio in AAPL currently. I have a 10 or 20 year investment timeline and hate the idea of selling such a great company for a loss…but want another perspective…I am contributing to the portfolio at around 15% or more annually in new cash. Would you suggest selling at this low and diversify immediately or ride AAPL back up before diversifying?

A. First off, you really can’t allow yourself to be “ashamed” of a mistake from trading or investing. I have known many professional investors who have over-concentrated their portfolios on one trading position at exactly the wrong time. Those who persevere through the mistakes and stay in the game often end up coming back bigger than ever. At any rate, as I wrote earlier today, “the only thing that matters now is — how best to balance risk/reward now?” And you probably do need to go ahead and reduce some of that pressure in the portfolio and in your head that’s coming from being so overly concentrated in a single position. Getting down from 55% of your overall portfolio to say, 25%, in AAPL is still too heavily concentrated, and this is coming from me, a big AAPL holder for a very long time and still an AAPL bull. Contributing 15% or more to the portfolio annually and taking a steady, consistent approach to your trading, investing and overall money management responsibilities with the knowledge that your time horizon is basically the rest of your life is what it is all about. Don’t be ashamed of making mistakes and letting us all learn from them. Thank you for sharing!!

Q: What is your opinion of municipal bonds (direct investment and/or mutual funds) as a source of yield for retirees? I know there is always some market risk but how would you assess the risk in realistic terms?”

A: We are in the midst of an historic bond bubble and it’s lasted years longer than most anybody expected. (Noticing a theme in today’s Live Q&A Chat…something about bubbles getting bigger and lasting longer than anybody expects?) I don’t like the outlook for municipal bonds at all, as I do think the cost of capital is going to rise over the next few years and that we can expect to see double digit interest rates in the next decade. A spike in rates would mean a drop in the value of your bonds, ie capital loss. Fifteen years ago I liked muni’s and used them for my clients. Today, I wouldn’t touch them. There’s no downplaying how much harder it is to find safe yield in this 0% interest rate climate.

Q. Hi cody. What do you think of CMG puts or short before its earnings? Was so much tempted today to buy CMG May puts. What do you think?

A. You’ve got 8 days still before the earnings report, and who knows how far this part of the bubble rally we’re living in will last. I do think CMG is an intermediate-term short, but I don’t know if this quarter’s earnings report will be a catalyst one way or the other.

Q. Any update on your XONE research, Cody? Thanks.

A. Yes, I’ve been working on it and I like what I see with XONE. It’s just that the valuations of these 3-D printing companies is crazy. I do think we need to buy a tiny bit of some of this sector to get exposed and will be doing so soon. Thought we’d get a big pullback in the broader markets and that we’d get a chance to build these positions up in a short-term crash. It’s still early in the 3-D boom game though.

Okie dokie folks. Chart of the day: Real-time bitcoin intraday chart. Big crash. But back to where it was trading against the $ just last week.