Feeling Fearful

I made a solid return trading HCA, a healthcare company, in past weeks. I keep returning to it partially because of the natural value play with the pandemic going around, but also to try and review my successful trade. This name is forming a pullback right now, but I saw other names with pullbacks too. So I went and created an Absolute Change indicator to locate the biggest movers in the S&P regardless of direction. At this moment and perhaps usually, many of the symbols appear to have the same bearish pullback pattern, and I feel that I should target the top mover with that pattern (NCLH) for greater returns rather than a middle-ground average mover (HCA). Cruise lines are leading the biggest daily movers as of 27 March 2020: NCLH, CCL, APA, RCL, etc. The absolute change alongside the net % change will allow me to quickly identify what sectors are up/down and if the biggest movers are up or down going forward.

I have also created a SigmaSpike indicator based on Adam Grimes’ blogpost to identify big bangs (2+ standard deviations in both directions) that are significant. It does seem that 1-3 month trends start with a bang, but the tough part is identifying the beginning of trends versus the recent crazy noise with multiple bangs in both directions as the Fed feeds the Godzilla that they have created.

On that topic, why aren’t we buying an apple with barrels of cash that I read about in my high school textbook about Germany in 1923? Why haven’t we joined the recent ranks of Venezuela and Zimbabwe? Why aren’t we wiping our asses with dollar bills with the plethora of currency coupled with a lack of toilet paper? Because it seems that the way to delay? avoid hyperinflation is to collude with most federal banks around the world and print money in tandem. Hence, one central bank could independently create a localized hyperinflation to sink the ship, while all of the central banks in concert create the tide to lift all boats.

My sister has started buying stocks ‘low’ alongside Warren Buffett based on a Facebook group stock tip. Warren bought DAL after a major decline in the market, followed by a further decline, so he is underwater on that trade right now. Warren bought 976,000 shares at $46.40 equating to $45.3M on 27 February 2020 after the ~22% decline in DAL from a couple of weeks prior. His value purchase was followed by a 37% decline!

Annotation 2020-03-29 192408 Warren buys DAL

The saying goes, be greedy when others are fearful, be fearful when others are greedy. When they tell you to buy, sell. When they tell you to sell, buy. So what the hell do we do when Warren Buffett and a Facebook group tell us to buy? Everyone is greedy right now; sign-ups to brokerages have exploded. Therefore, I am leaning towards ‘fearful,’ bearish.

Is “dumb money” seeking value after the decline, too hastily? If so, Warren Buffet has signaled the ranks to enter the market already. Or will the Fed print our way to prosperity and traders go back to Buy The Fucking Dip (BTFD) through DJIA 30,000?

It’s a battle between the technicians and the fundamentalists! Who will win? In 1-3 months I’m guessing the technicians. After that, well, all forecasts are wrong but I still think lower for at least a year as we watch and digest many bankruptcies and some bailouts (crony capitalism) in the headlines.


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