4-26-2013 before the open
I will be traveling today to San Francisco to attend Market School and Chart School over the weekend. These are a couple of primo seminars taught by IBD by two of Bill O'Neil's best portfolio managers. I am reminded by something Bill said once in a meeting: "Would you rent a set of clubs and play Tiger Woods for money?" Of course you say not but in the market we have people all the time doing the equivalent. Investing is very much an activity where you are playing against professionals who want your money. Education should be considered an ongoing endeavor just as with Doctors and Lawyers. I try to learn from people who actually run money and are successful. Last year Charles Harris (one of the speakers) was up 300% in his account. Charles and Mike Webster (the other speaker) created the Market School model. I hope to get some updates in their thinking this weekend.
The market sure has been difficult to maneuver in lately. I think the bears tried to gain control and got waylaid by central banks. The kind of volatility in market direction calls is reminiscent of previous times when the market was stalled out. Having most of you money under your mattress seems okay to me. Pascal's comments seem particularly good this morning by focusing on large cap value, stocks with dividends. This is not the kind of market CANSLIM investors are particularly good at. I remain at least for the moment in LL, and FLT long and ALXN and ALGN short. ALXN rallied hard right into the 200-day yesterday. I considered selling but the 200-day is my action line. If it breaks convincingly above I will cover which could happen anytime of course. I am still positive in the position. The other short ALGN has really gone nowhere and I am slightly down as it hovers at the 50-day action line.
If the NASDAQ closes above the MarketSmith marked high of 4/11/2013 (3306.95) the market exposure model will turn the buy switch on. This is a rare occurrence called a fail safe rally. It is designed to put you back into the market when the market is actually rallying but no follow-through day has occurred. If this occurs we will be at a +2 (55% invested) count with restraint on. Restraint limits exposure to 55% until restraint is turned off. Restraint would remain on until we close 1.25% above the prior high. The buy switch would subsequently be turned off if we don't get a follow-through day and we close below the prior high. In history this approach has both worked well and led to rally failure, such is life. Typically IBD market calls follow this procedure but they are not bound by it. I particularly like having a 100% mechanical model that tends to put me in the right place in the market. Mechanical models can not be spun by opinion which is most of what we get in the market place.
The news about central banks buying equities is amazing to me. So is the news about physical gold and silver shortages. We live in a manipulated market and unfortunately our collective governments are your competition; they want your money and they have more information than we do. Gold has been a falling knife, I am no good at catching these and have to sit until I can understand what is going on. I am monitoring the monthly and weekly Coppock curve for insight. A buy signal may be setting up but it is quite premature at this juncture. With physical gold shortages I can possibly foresee however a volatile move up if one of the gold brokers cannot meet a futures contract delivery with physical gold but has to settle in cash. This would ring the alarm bell that the "run" on the gold bank has emptied the vaults and gold speculation could run rampant again.
I am suspicious that in a time when the US could not honor the German request of returning their nations gold held in US storage that the gold price tanks. How convenient that the price drops just as the US needs to buy back German gold to meet the obligation.
