Happy New Year !!!
2013 was a fabulous trading year, by far my best year ever and this is especially noteworthy considering I have had many monster years.
But all this is now in the rear view mirror and I only care about the New Year and all the new, exciting, unusual challenges/lessons it will bring.
I closed 2013 being 100% in cash not counting my large long term fixed income holdings.
I always like starting the New Year with a fresh open mind without any positions, baggage or biases.
My early 2014 thoughts:
I expect market euphoria to continue the first half of January, especially the first 7-10 days.
Historically this short period has been extremely bullish, so I will use extra caution when considering and qualifying short trade ideas and entries.
Immediately after mid-January there are alarming headwinds on the horizon.
First, market rally is already extended and likely to get more extended early January heading into earnings season.
This could set up as a “sell the news” type of earnings season.
Secondly and much more important, the debt ceiling deadline is Feb 7 and nobody is really talking or thinking about that yet but this will change after mid-January.
As we get closer to the deadline I expect market stress/anxiety to increase substantially.
All politicians are scum and none can ever be counted on for timely rational behavior and this will once again prove to be the case.
My only interest in January is strictly intraday trading, especially on the short side, as usual.
I have zero interest in starting or building positions to hold in January, unless I really love something a great deal.
Personally, I could care less which way the market trades, as I am always quick to adjust my trading accordingly regardless of direction.
Historically 70-80% of my yearly gains come from intraday shorting in the small cap market and I expect plenty of decent opportunities to arise in January.
I have stated numerous times on Twitter the fact that I never hold any shorts positions overnight in a bull market, only in a bear market.
In general, in order to hold any positions long or short I need a very crystal clear market tailwind to do so.
Strong Trend is Your Friend !!!
Food for thought and huge MYTH about shorting:
Swing/hold short positions have a high correlation to overall market direction. Obviously a weak market helps such positions while strong market hurts them.
Intraday shorting is a totally different animal !!!
IT IS ALWAYS MUCH EASIER TO SHORT INTRADAY IN A BULLISH MARKET RATHER THAN A BEARISH ONE OR NEUTRAL ONE.
During a bullish market there is underlying euphoria and traders/investors are far more likely to bid up and chase meaningless news/stories to very unreasonable levels.
It makes finding nice fade ideas and setups much easier and they occur far more frequent.
This is where I walk in the door, bring my short hammer and introduce a serious taste of reality for the insane chasers.
The key off course is to be very selective, key on stocks with terrible fundamentals and very substantial price extension, use intraday relative weakness to add shares and off course solid initial entries and patience are critical.
Trees don’t grow to the sky and how high do you think WEEDS grow? Gravity is very powerful !!!
Wishing all of you a very prosperous 2014 !!!
Michail Shadkin @EpicaCapital |
