I am beginning to think, these days, that with the exception of Warren Buffett, nearly everyone worships at the altar of price momentum.
Seemingly, more than ever, commentators today are citing “levels”, charts, flows and my least favorite indicator (and one that has never been documented as a plausible and profitable endeavour) – “unusual” call activity that is really quite usual. (As I have written in the past I am respectful of those that earn a living by utilizing some of the more thoughtful and disciplined methods of technical analysis.)
I, too, have caught a bit of that “technical” infliction as I try to complement my long term investments in a new regime of volatility – as, in recognition of a machine/algo dominated world that exaggerates short term price moves, I am trying to adopt to an investing world that is more reactionary and less anticipatory.
I am so old that I still remember fundamental investing — recognizing that in the short run the market is a voting machines, it is a weighing machine over time (again, Buffett).
My experience is that fundamentals nearly always win in the end and it is that approach that I champion.
Near term I continue to view the market as at or near the upper end of a defined trading range – 2550 downside and 2725-2750 upside (reflected in S&P terms). Technically, this is an obvious level of resistance as well as an important Fibanocci level.
Some other short term concerns:
* Crude and energy stocks are market leaders – often a signpost of a late cycle market move.
* Bullish investor sentiment is rising. (See Divine’s comments this morning.)
* Concentrated and narrow leadership in ” MANA”
I see a bumpy market road in the second half of the year.
As expressed in “The Madness of (Investing) Crowds”; I outlined the pillars of my bearish views (the growing ambiguity of global growth trajectory, rising interest rates, the inconsistency of policy, etc.).
My core trading and investment strategy is based on the notion of upside reward vs downside risk (the difference between current prices and my calculation of “intrinsic value”) – expressed by the calculation of a list of fundamental outcomes and the probabilities of those outcomes.
While many see higher lows and higher highs – since the early February drubbing, I view today as a good time to derisk.
At least based on my perception of the fundamentals.
Doug Kass, since 2004 Doug Kass has served as President of Seabreeze Partners Management, Inc. He runs a hedge fund and individual managed accounts, co-authored “Citibank: The Ralph Nader Report” with Ralph Nader and the Center for the Study of Responsive Law in the 1970s and wrote "Doug Kass: A Life on the Street" two years ago (John Wiley). Since 2003 Mr. Kass served as a guest host on CNBC's "Squawk Box" and has guest hosted Bloomberg's "Market Surveillance" for the last five years. Along with Jim Cramer, Doug is the principal contributor to Real Money Pro.