I haven’t updated my blog in a while, so here are some random market thoughts (in no particular order):
1) Two Friday’s ago (January 29th), many sentiment measures (CNN Fear/Greed, Equity put/call, etc.) showed their highest levels of bearishness since November 2nd. This past week in the market was the strongest since…you guessed it…the first week of November. It’s amazing how quickly sentiment changes in this market. A few weeks ago, everyone was a genius and the market was never coming down. Then, the GameStop situation caused some volatility and people started talking about a crash. For all the talk about euphoria, it sure seems like there are a lot more nervous longs than euphoric market participants.
2) Many Mega Cap stocks have gone nowhere for the past 5-6 months (i.e. AMZN, AAPL, MSFT, FB, NVDA, ADBE, NFLX). If these stocks start to emerge from their consolidations, it could really lift the market higher. So many people seemed upset last week because Amazon’s stock didn’t move after the company destroyed their earnings. My feeling is the market makers kept the price stable so that the majority of people who played options over the earnings got screwed. It wouldn’t surprise me to see Amazon start moving higher soon.
3) Focus on quality stocks. Most people who struggle in the market do so because they buy shitty stocks. It’s ok to speculate in riskier stocks with a small portion of your portfolio, but make sure the majority is focused on the stronger names. If you have trouble picking stocks, stick to index ETFs.
4) It seems like the consensus is calling for a 10% correction. Even though we didn’t experience an actual 10% correction, many of the common elements associated with this type of correction happened two weeks ago. For example, many hedge funds lost 10-20%, and the spike in the VIX was similar to surges we’ve seen during 10% corrections. It’s possible we had a compressed, correction on steroids beneath the surface as a result of the massive hedge fund deleveraging.
5) I noticed that Cathie Wood’s ARK Innovation ETF (symbol: ARKK) is already up 20% year-to-date. She’s doing this through three difficult steps: A) Concentration. So many people have trouble keeping their portfolio focused in big positions, mostly out of fear or because they want to own everything. B) Picking strong stocks. Again, stock selection is key. C) Having the conviction to hold. The last one is the hardest part for everyone (including myself). The key to success in the market is to buy winning stocks and then manage the battle within yourself to hold those winners. A perfect example of her executing this plan was with Tesla. She picked an amazing stock, maintained a 10% position in her fund, and has held it the entire way up. I love how she is revolutionizing money management and embarrassing so many “traditional” funds.
6) Speaking of Tesla, I still think it has more upside over the long-term. I wrote about it a year ago in a post titled “5 Reasons Why Tesla’s Stock Could Move Higher” and compared the growth in electric cars over the next 20 years to the growth in smart phones over the past 20 years.
7) There are many differences between 1999 and today’s market. One that came to mind recently is that back then, people quit their jobs to become daytraders. Now, people are almost accidentally choosing to trade because they’re stuck at home due to the pandemic.
Last week, the S&P 500 held its 50-day moving average and the Nasdaq Composite and Russell 2000 held their 21-days. More importantly, there’s very little distribution in the Nasdaq Composite. I’ve done a solid job of keeping my Educational Members on the right side of the market and I’m still finding many ideas that could move higher this year. If you’re looking for regular analysis on the market as well as strong stock ideas, here’s the link to my Educational Product. Investor Education – Joe Fahmy I’ve received great feedback from the members and I’m confident you will learn a great deal when you sign up!
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