Higher For Longer, It Seems
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Analysis by Alex King, CEO, Cestrian Capital Research, Inc.
As a heads up, Richard and I are working on a refinement of our ratings system. As a firm we seem to be successful at two kinds of buy/sell analysis:
- Long-term Wyckoff Rotation, meaning, accumulation at the lows subject to a stop-loss, then patience as a stock moves up through the markup zone, followed by distribution at the top once a certain Fibonacci extension is hit. Timeframe for names like this tends to be months / years. Success in this paradigm is based on buying the names everyone laughs at, and selling the names where the kid at the bus stop is telling his friends about them.
- Short-term momentum based on moving averages. Timeframe can be days or weeks, sometimes months. Success in this paradigm is based on overriding one’s own emotions and accepting that trends can run higher for longer. (The reverse is also true, so we can use this to the downside when the next bear comes along).
Where we have a dead zone sometimes is in the Markup Zone; stocks can meander sideways, drift down awhile, and so on, so that even when these names do make it into our Distribution Zone, the time taken (= IRR) takes a hit.
What we’re working on is introducing a momentum aspect to the Markup Zone to limit the dead-money problem.
This is work in progress; once we have a system we’re happy with we’ll walk you through it.
In the meantime, let’s take a look at where markets stand.