A Look at Tuesday’s Market: And the Computers Went Wild! I think that about best sums up how I feel about the markets move yesterday. The overall market was moderately higher until J.P. Morgan announced that the Fed had allowed it to increase its dividend and enact a $15 billion share buyback, then everything went sharply higher; with the exception of the gold stocks. I know that the justification for this is that this is seen as a key sign of health for the overall market, and that the economy (and the banks) are advancing to the next level of health and strength. I just do not think that justifies the size and breadth of the move.
A Few Thoughts on Wednesday’s Market: For the record I do not like moves like we saw yesterday. I think they distort the charts, and increase the chances that the trading the next day will result in a loss. Generally I like to see a day or two of follow through with a form of consolidation that indicates that you are not going to get whipsawed out of the position. While that doesn’t mean that I won’t be looking to trade today, it just means that I am going to be very cautious about entering a position.
We are going to start something new today at Sterling Investments; we are going to start tweeting our daily trading idea. I used to to publish a daily trading letter, the Sterling Prime Stock Newsletter, but I found that the changes to the market from the rise of modern computer driven trading has pushed the time by which I selected the day’s recommendation closer and closer to the open where I was unable to publish the recommendation with enough time for my readers to take advantage of the recommendation. Additionally as the volatility in the market increased, I found the short term trading of individual stocks to be increasingly more difficult to manage. This resulted in my shifting my trading strategy to one of covered puts and calls. Granted it is not the most exciting, but the results are a lot more consistent. So, starting with tomorrow’s market commentary, I am going to start tweeting our daily stock and options recommendation once we have selected the position.