Mike
02-12-2014, 08:14 AM
IBD marked a follow through day on yesterday's action. Up 1.1% on the S&P is usually light for a FTD but we have generally been in low volatility conditions over the last year and perhaps 1.1% is significant. The Market Exposure model is at a +2 exposure (55% invested). It appears that we are in yet another bounce after a small pull back. I still have some short positions (NUS, CTRX) and the following longs (AEM, SLW, FB, TSLA, KS). My rules say to cover short positions after a FTD so I will likely cover them before the close today. AEM (a gold miner) has been held since January 10 and is doing well so I bought SLW last Friday to add to the gold miner exposure. My intention is to hold the gold miners long term if I can. Because of this I chose liquid names, AEM trades above 2.5M shares per day and SLW above 4.5M shares per day. Thinly traded stocks might shake out too easily. If the market rally stalls and a next crises develops even these names will be under pressure in a move to cover margin calls.
Eventually I expect the market to blow up but I can't argue with what I see. Our tapering has been causing a flight of capital out of the emerging markets and perhaps we are witnessing a melt down in those regions. The Ukraine, Indonesia, Argentina and Venezuela are fighting to defend their currencies. Turkey, India, South Africa, Indonesia and Brazil have hiked rates to try to stem capital flight. Argentina has depleted US Dollar reserves and has had to ban further importing. Argentina has blown up so many times in the past that it is probably not a widespread investor fear trigger. Eventually I expect these things to matter to everyone. Perhaps the gold sector is already noticing.
Eventually I expect the market to blow up but I can't argue with what I see. Our tapering has been causing a flight of capital out of the emerging markets and perhaps we are witnessing a melt down in those regions. The Ukraine, Indonesia, Argentina and Venezuela are fighting to defend their currencies. Turkey, India, South Africa, Indonesia and Brazil have hiked rates to try to stem capital flight. Argentina has depleted US Dollar reserves and has had to ban further importing. Argentina has blown up so many times in the past that it is probably not a widespread investor fear trigger. Eventually I expect these things to matter to everyone. Perhaps the gold sector is already noticing.