Currently, we are still in a down market with mini-rallies taking place. Many have called a bottom already and I see no reason to think we have bottomed. The majority of bottom calls are typically far too early. I try not to call bottoms but rather wait until the confidence returns and move fast from there. One of the biggest mistakes investors make is to call a bottom too early and average down. When the bottom call is not right, they are already heavily invested and taking unnecessary losses. You must learn to protect your capital. Unless you are day trading the volatility, I do not suggest building long positions until we see reason to think these prices will stick. We are oversold but that does not mean we will rebound from here. Many stocks are cheap compared to what they were last month. This makes them look very attractive to buy but if we maintain this downward sentiment, they will look even sexier next month.
As I have been stating, I am inching closer towards 100% cash. I am still bullish on crude oil for the very short-term, especially if BP plc (BP) can fix this oil disaster (I no longer feel comfortable calling it a leak). I think any psychological reason to buy could rally crude oil prices briefly. I will sell into this strength and walk away from my oil positions. I no longer feel comfortable holding any positions long-term so I will look to exit my position in Kodiak Oil (KOG) into strength even though my original intent was to hold longer. If the market recovers, I will gladly pay a higher price for KOG and hold it long-term since I will feel more comfortable at that point in time. It will not reach a top in the PPS overnight.
With that being said, I have some articles below that I found interesting reads indicating to be very careful this summer in the market.
25 Questions for those who think we are in an Economic Recovery
Interesting questions/points on why the economy is definitely not in a recovery phase. I found the talks of a recovery a few months ago to be ridiculous. Economic recovery announcements are very far and few between now.
Don’t Rule out a Double Dip Recession
Richard Russell: Sell Everything
Above are more bearish articles warning to be ready for a potential market crash and potentially a bigger crash than we have ever seen. It can be argued we had a soft-landing for our original crash. Now, some are predicting this will be much more severe. I see too many bottom callers to think we have a bottom. When CNBC calls a bottom, it is typically not even close. A general rule of thumb is we have not bottomed until you see so much panic and fear that everyone seems to be afraid. We are definitely not there yet.
Lastly, I’ll leave you with a nice oil discussion from yesterday. Dan Dicker creates a convincing argument for crude oil bulls in the short-term. I am in agreement with him 100%.
As always, make sure you do your own homework. Be careful in this market. Good luck out there.
Mike
At the time of publication, Kudrna was Long KOG but positions may change at any time.
