Clearly, this last sell-off and quick reversal has caught most investors/traders off guard. I tried hard to get everybody ready for a quick sell-off, but the V-shaped recovery has most investors confused and now waiting again for another pullback. I received calls from investors yesterday saying they missed their “wishlist prices,” complaining the prices did not stay there long enough. All I could do was smile. We are now in the best nine-month period of the well-documented Presidential Cycle in which the market advances 88% of the time! Those are some good odds! And after this sell-off you are waiting for another pullback. That is what I call chasing the tail.
Let’s face it, each pullback is scary. Reasons show up suggesting “this time is different!” The reality is that the scarier the news, the more effective the shakeout works. If Ebola wasn’t scary enough for you, what is? The inability of investors to buy when fear is running high is what keeps them from making money. Buying healthy pullbacks works well in most markets, buying “the breakouts” only works in the strongest markets.
Most technicians and bearish traders will now be looking for a lower top and will start screaming this was a dead cat bounce in a cyclical bear market. I expect any pause in the new upswing will be just that, and the markets will continue to improve and we are off again to new highs.
I’ll just continue to leave my offense on the field and use stop losses and trailing stop losses. Many Magnet® holdings look great here. I am always trying to look around corners to see risk while managing portfolios. Right now I am glad to have had the opportunity to add to great positions on the last pullback.
Longs: Akorn, Inc. (AKRX), VASCO Data Security International Inc. (VDSI), Federated National Holding Company (FNHC), Ellie Mae, Inc. (ELLI), Douglas Dynamics, Inc. (PLOW)
Shorts: Chico's FAS Inc. (CHS), BroadSoft, Inc. (BSFT), ViaSat Inc. (VSAT)
By Jordan Kimmel, Chief Investment Officer at Investview, Inc. (INVU).
