Reversion To The Mean

After a nasty day where over 90% of the volume was down volume, you’d expect a rebound rally.  Well, we got it today.  A horrible day yesterday and like bouncing a ball off of a building, it bounced some of the way back up.  For a while, it looked like we’d get some substantial gains but sellers came in during the last 30 minutes.  Keep in mind that the bulls out of it yet though.  The uptrend is still intact but I’m still a seller, not a buyer.  If you are one of those bulls, I’d shift your time frame out a bit maybe a few weeks.  Give the market maybe a month or so to pullback.  Then, I think a lot of what worked during March & April will work again.  Scarce resources and emerging markets will once again rise.  In the meantime, build your shopping list of the positions you didn’t own during the rally but wished you did.  Or, better yet, look to re-enter the positions you’ve been selling lately.  Too often, investors sell a position and move on to something else.  Follow your old positions and look to re-enter them at more attractive prices.  All stocks have rhythms.  The more you get to know that stock and the way it trades, the more money you can make with it.

I think this is also a time we can reassess our portfolios and upgrade them.  For example, I owned a mutual fund that invested in opportunistic chinese companies but didn’t perform as well as a closed end Chinese fund.  Yesterday, I took profits on that Chinese fund and once we get a better entry point, I’ll upgrade by purchasing the closed end fund I really want at lower prices.

Always remember, you have much more flexibility than a lot of professional money managers.  Take advantage of that and use it to your advantage. This market is begging you to do that.

This post published at www.karleggerss.com

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