The Month That Was And What Worked

We started the month of October somewhat in an oversold level with an issue (government shutdown) that many thought was a huge uncertainty with negative implications for the market.  However, like we wrote on this blog at the beginning of the month it seemed like the big money was not concerned with the Government shutdown because underneath the surface stocks were acting well.  And just when everyone was getting concerned and voicing their somewhat bearish opinion about the market that was exactly when the market repeated the same pattern it has been repeating for the last 18 months; a sell off that is a lot harsher on stocks that the indices show, people get bearish and forget about QE and Bernanke at exactly the same time that they should be believers, the market then finds a bottom and proceeds to grind higher for 15-20 days making a marginal high that gets everyone excited just to have a 1-5 day sell off specifically in the momentum stocks that gets everyone bearish again—rinse and repeat.

What worked well at the beginning of the month were the Chinese stocks which is where we got the bulk of our gains for the month.  But like everything else all good things come to an end which we warned about right when we were getting an extra amount of recognition for pointing them out and playing them early; we did so here and here.

Finally when the Government found a solution to the shutdown that was exactly when the indices continued to grind higher but less and less stocks were participating.  You can see that with my returns–since the 16th of the month it was pretty much a flat line there after.  You can also see it with the amount of stocks in the Russell 3k that were above their 10 day moving average on 10/18 (85%), fast forward to 10/30 and you only have 63% of the stocks above their 10 day even though the market went higher for 7 of the last 8 days.

As we end the month a concern that many are worried about is the selling in some so called “LEADING” stocks after they reported their earnings.  We have had some spectacular after hours sell offs in $LNKD $TRLA $FB $AKAM $YELP.  It looks like $LNKD $YELP and $TRLA will enter a period of pullback/consolidation with limited upside, $FB too early to tell.

RETURNS1

RUT3KVS10DAY

I realize that the month is not over, but it is for me.

Zor Capital Managed Assets

I can be reached at [email protected]

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