Things have changed.
That is about the only conclusion one can reach after the three most violent weeks in stock market history.
The historic average length of time for a 10% correction is 64 days, or more than two months. This time we did it in nine.
However, we all learned important things from the experience.
For a start, if your financial advisor told you to sell all your stocks at the bottom fire them immediately. A lot did, because we could see it in the February 9 capitulation market volume. Selling lows and buying highs is certainly NOT the way to financial freedom and independence.
Also, we learned the value of the 200-day moving average. A whole bunch of Fibonacci support numbers kicked in right about the same place.
I have never been big on technical analysis, viewing it as the refuge of newbies and wanabees who can't figure out what else to do. They are the red meat for the algos.
However, I could see the S&P 500 (SPY) gunning for this number at $252, and sent you trade alerts to BUY as fast as I could write them as we approached it. But the 2,000 Dow rally that followed? That was the stuff of B-movies.
I was also willing to bet the ranch that technology would lead any recovery. This is the sector that every investor, from the day trading college student to the $100 billion hedge fund manager has been trying to get into at a decent price for years.
And tech delivered big time. It has been the most instant creation of market wealth in history, with my names of Apple (AAPL), Micron Technology (MU), Facebook (FB), Salesforce (CRM), and Amazon (AMZN) leading the charge.
And then to short the Volatility Index (VIX) at $39 and watch it halve in days? It boggles the mind.
Probably the smartest thing I have done in my 50-year trading career was to start the Mad Hedge Technology Letter on February 1.
The insights I am gaining with the additional research has not only substantially upped my game in technology, but all other asset classes as well. They're all connected.
Why technology, when more attractive opportunities beckoned with gold or Bitcoin newsletters?
To quote the famed bank robber, Willie Sutton, as to why he robbed banks, "It's where the money is."
By the way, you can still buy the Mad Hedge Technology Letter
at the inaugural price of only $2,000. The full $2,500 price kicks in on March 1. To learned more please click here. To get the discount price please email Nancy at customer support at support@madhedgefundtrader.com
One amazing concept that I have just stumbled across is that big tech has become the new defensive "safe play", replacing the high yield telecom stocks of old, like AT&T (T).
Apple is already the largest dividend payer in the United States in absolute dollar terms. It is returning a stunning 90% of its gargantuan free cash flow to shareholders, with some 72% going to share buybacks alone.
After a 17-year hiatus, Apple resumed its dividend five years ago (Steve Jobs hated the idea), and now stands at a 1.46% yield. The company has since boosted its dividend by 10% every April like clockwork.
We here at Mad Hedge Fund Trader made a heroic effort to help followers of our Trade Alert service cope with the most tumultuous market in history.
At the worst of the worst we were down only -8%, and fought tooth and nail to get back up to +5.5% by Friday. It was a performance for the ages. It is also a vindication of the trading strategy I have been pursuing for the last decade.
If you can survive this week, you can survive anything. You are totally bombproof.
We only got nicked at the end with a short position in Apple which we picked up two days too soon. But then how often does the world's largest company rise in value by 12% in four days, adding $125 billion in market capitalization?
How about once a lifetime.
We are now done with Q4 earnings season, so the dominant factor will be the Fed governors who will be speaking at public appearances every day of this shortened week. No doubt inflation will be a hot topic, a definite market negative.
On Monday, February 19, the markets were closed for Presidents Day.
On Tuesday, February 20 no data releases of note take place.
On Wednesday, February 21, at 10:00 AM EST, we get January Existing Home Sales. The FOMC minutes of the last Fed meeting on interest rates will be released at 2:00 PM.
Thursday, February 22 leads with the 10:00 EST release of the Index of Leading Economic Indicators, a read on ten data points giving a read on economic performance six months into the future.
On Friday, February 23 at 1:00 PM we receive the Baker-Hughes Rig Count, which saw no change last week.
As for me, I am trying to get rid of the tag ends of pneumonia I have been dealing with for the past month, the result of my January battle with the flu.
I think I'll head over to Squaw Valley and dive down a couple of double black diamond slopes. I hear that exercise helps clear the lungs.
Good luck and good trading!
