Window Dressing:
A common definition for ‘Window Dressing’ is: A strategy used by mutual fund and portfolio managers near the year or quarter end to improve the appearance of the portfolio/fund performance before presenting it to clients or shareholders. To window dress, the fund manager will sell stocks with large losses and purchase high flying stocks near the end of the quarter. These securities are then reported as part of the fund’s holdings. Put simply, window dressing is a common tactic that big managers use so they can show their investors better results on their monthly, quarterly or annual statements. This is not a proven fact but because that would be known as painting the tape and painting the tape is illegal. [Painting the tape is another way of saying someone or a group of people control/manipulate stock prices.] So instead it has become a self fulfilling prophecy where people expect a little bounce as we approach the end of a calendar month, quarter or year.
Market Update: Short Term Under Pressure
If Thursday’s lows hold, there is a very high likelyhood that we bounce from here. A few areas of the market remain weak: Nasdaq, Growth, and Biotechs. Outside of those areas the broader market looks fine. Keep in mind, Monday is the last day of the month and quarter. So this sell-off could be the beginning of something more severe (a deeper pullback) or just end of quarter profit taking in the strongest areas (Nasdaq, Growth, Biotechs were standout winners this quarter, and have fallen hard over the past week). I believe the latter scenario will prevail. Here’s why:
Facts Are Facts; Mixed Tape:
The heavy selling in the aforementioned areas is not ideal and if the selling spills into other areas then expect the pullback to get deeper. Until then, the market has earned the bullish benefit of the doubt and the intermediate and long term outlook remain healthy. Stepping back, keep in mind, the S&P 500 is just building a new base below record highs to consolidate last year’s very strong move (which is bullish). As of Thursday’s open, the S&P 500 and Dow Jones Industrial Average are still above their respective 50 day average price lines. The S&P 500 is trading near 1850 and has flirted with that level almost 20 times in recent weeks. One should expect range-bound action to continue until either resistance (1884) or support (1833) break.
Big Money Is Made By Sitting:- Jesse Livermore
“It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine–that is, they made no real money out of it. Men who can both be right and sit tight are uncommon.” -Jesse Livermore
This is the guiding principle for my Midas Wave Alert Service. I make the most money when I “sit” in leading/monster stocks. I do not like to actively trade these stocks to take a few points here or there. I want to capture the bulk of the move, not pick an exact top or bottom. This process requires me to be patient with my winners and quickly cut my losers.
That is our process. that is out thinking and doing this allows us to “sit” in monster stocks. It does not always work out in our favor but over time (multiple cycles) this process has worked very, very well. If you are looking for a different approach then (most everyone out there) that is designed to help you find and own big monster stocks- then I strongly believe this service is right for you.
Keep Your Emotions In Check:
It is very easy to throw in the towel and get consumed with fear. At any given time one can easily point to a long list of “negatives” in the market. Come to think of it, I do not every remember or know of any time in history when everyone was positive. Even in during the Dot Com bubble in the late 90’s lot of people were worried about extended valuations, profits, revenues, etc. Just like every other bull market in history (present one included) eventually it will end. At that point, people can easily point to the long list of “reasons” why the market ended. When in fact, the reality is that markets move in cycles: Up, Down and Sideways. That’s it. Every bull market has a beginning and an end. Ditto for the bears. Furthermore, bull markets typically do not end in fear, they end in euphoria. So the fact that fear is elevated right now suggests that the bull market is still alive and well. Remember, we have not had a 10% pullback in almost two years so a decent pullback of some sort will eventually occur. Until more technical damage occurs, it appears that this is just another short term pullback.
Note from Editor: Adam is the CNBC-quoted hedge fund manager and trading genius whose recommendations were actually UP 55% in 2008 and continues to provide great profits for subscribers to his Midas Wave Alert service.
