Nothing has changed with my Fourth Quarter Game Plan that I outlined on 9/16/13.
1) There will be no Fed taper until next year.
2) The S&P 500 could see +5-7% upside from here, but individual stocks could potentially see significantly more upside. My feeling is that individual stock pickers will be rewarded more than ETF traders.
3) Money managers will continue to chase the Big Cap names: $GOOG $AAPL $PCLN $AMZN $NFLX $V $WFM etc. For momentum players, we might see “1999-like mini blowoff” moves in some Biotech, China and Social Media stocks.
4) We will continue to have sharp 3-5% shakeouts in the averages. Unfortunately, these declines can possibly bring many of the momentum stocks down 5-20% in 2-3 days (as we recently saw on 10/8-10/9). The best way to avoid these declines as a trader is to take profits into strength and look to re-buy on pullbacks. If you’re an investor, getting a good entry point is very critical so you have a profit cushion to help you sit through some of the volatility.
5) As always, a geopolitical event or a mess in Congress could derail this plan.
I’ve noticed many people sharing this same view recently, but keep in mind there is a big difference between what people say and do. For the most part, people are horrified to buy stocks at new highs, especially after they have already made strong moves. My feeling is that open-minded traders and those who experienced 1999 will be rewarded much greater than those who try to fade everything.
One last point I would like to address. When I moved to cash on October 8th, I already locked in profits before this date and saw some potential warning signs early that morning. I was down -0.40% that day, but would have finished down -5.0% if I did not take action. Two days later, I was able to buy back many of the stocks I sold at lower prices.
As I mentioned in my post, I have no problem making decisions and getting back in. That’s why I stress not to follow me or anyone else blindly because you have no idea how people trade or how aggressive one’s positions may be. Keep in mind that it is MUCH different trading for clients than it is for yourself. My number one goal is to protect client accounts, PERIOD! With your own money, you have no one to answer to.
Going forward, I will no longer mention investment levels on this blog, mainly because I am an active trader and my investment levels vary too frequently. Also, I always try to encourage people to make their own decisions and not to rely on anyone. Have your own plan, learn to make decisions, and do your best to master a philosophy that fits your own personality. We are heading into a seasonally strong time of the year. Try to take advantage of it by working hard, staying open-minded, and having confidence and conviction in what you are doing! Good luck trading!
I can be reached at: [email protected].