Top Advisors Corner

Gene Inger: The Inger Letter - October 24, 2014

Gene Inger

Gene Inger


Slice & dice volatility - dominates this week's activity. Not to be overlooked at all: this approaches the fiscal year-end of many funds; so they tried their best, may yet-again, to deliver the best results they can to close-out their year. That contributes to both protective rallies OR declines (as we outlined). When we stepped-aside our hugely profitable short-sales early last week (as the Dow washed-out by over 400 points intraday, and our overall short-sale in the S&P was ahead by more than 100 handles, which is truly huge) we didn't 'turn bullish'; but simply called for a reflex rebound to retest upside around the 200 Day Moving Average; ideally running into resistance around the 50-Day.


This week's incredibly volatile alternating days (we were lucky in trading S&P E-mini extremes; as in both days subsequent news enable home-run moves)  cannot be explained by the simple injection of either 'terror attacks' (or fears of); or 'Ebola resurfacing' (risk isn't absent, but Dallas 'contacts' infer no need for excess panic; though public reaction will be dicey once flu season arrives). 

Perhaps I should observe that incredibly volatile markets are characteristic of 'directional transitions', not launching pads for technical continuation patterns. To wit: the stabilization in Oil and Oil Services, was a good sign to us to look for an interim low and harvest gains on the downside earlier last week; just as the movement up into resistance as this week evolves, was led by those Oils and a handful of big-caps like Apple, 3M, and Caterpillar. There are wounded warriors like IBM & Amazon, both of which we warned weeks ago as at-risk. 

Every one of the 'wounded' stocks, just like any statement from central banks, is twisted by most analysts or pundits into a bullish rationale (like they did with Jim Bullard's remarks last Friday, did not say we need more QE, but did say it might be necessary IF the economy truly recedes..ideas the market likes that, implies corporate results faltering as favorable?). Perverse logic worked while they had the Fed 'hurricane' at their backs; just a 'breeze' won't help so much.

An Apple Pay Day

For instance; lots of room for Apple to take advantage (special feature on a few areas, including the future, that analysts are not adequately recognizing; these include PayTV over-the-top progress; Apple Pay; even influencing the global cellular business, which relates to a thorough discussion of Apple Sim, initially on iPad Air 2, allowing easy carrier swapping, even internationally. I also addressed next year's important product-rollout using Intel's Broadwell.)

What we do know is this kind of volatility can offer an aggressive trader lots of opportunities to go against-the-grain of a protracted run. Our tendency not to pursue weakness, or chase rallies, has been useful in this trading climate. As a for-instance, we took bearish chips 'off' the table into the washout last week; all of them at one point; putting them back 'on' the table after the sharp rally. 

But look at the charts; again this 'rough-housing' is occurring about where it should (relates to risks rebounds running out of steam; technical strategies levels are provided via video for regular members). Truly a 'Battle Royale'.  

In summary: gigantic operating losses at Amazon are sobering; strikes at the core of markets, not just the emotions of geopolitical or concern about public health (issues). And of course Midterm Elections just ahead; after end of 'fund fiscal year(s)', and perception markets only rise in November and December. 

Also, VIX is among options just expired on CBOE; showing ongoing frenetic behavior. We've 'never' had quite so many shifts in direction as recently; that suggests schizophrenic instability, not really a bullish continuation pattern. 

Lots of hard challenges progressively resolving in markets; but progress is a fleeting goal in global economics and geopolitics. Increasing awareness and sobriety has belatedly dawned on analysts; amidst lots of calming rationales.
           
Enjoy the evening;
   
Gene
 
Gene Inger
www.ingerletter.com