Many traders and investors were complaining about the lack of entry points when the market was moving straight up in March. And now that we're flopping around like a fish out of water and changing direction every day, many traders are complaining about being whipsawed!
The core problem is that the market's action feels extremely random these days. One day we're running up on strong oil, but the next day we're falling down on weak oil -- and the day after that, there's no correlation to oil prices at all.
This stems from hedge funds and computer algorithms that are trying to stay step ahead of the market. They're all piling into biotechnology in one session, then precious metals the next. There really isn't any logic behind it; it's simply a quest to try to move faster than everyone else.
The other factor that adds to our difficultly as traders is that the macro situation remains so unsettled. There's still great confidence in the central banks, but underlying economic issues aren't going away. And at some point, the market is going to question all the stimulus once again and we aren't going to rally as interest rates turn negative.
There isn't any way to deal with this other than just being very selective and managing positions tightly. As I mentioned yesterday, I think gold has good promise here as a safe haven from the chaos.
Seabridge Gold (SA) and DRD Gold (DRD) continue to do well, and I'll be looking for other buys in the group as they develop. (I have a weekend column coming up about the possibility that precious metals might be starting on a major uptrend after five years of downward action.)
Meanwhile, I'm holding some ProShares UltraShort S&P 500 ETF (SDS) -- a 2x inverse play on the S&P 500 -- as a hedge. I'm also buying some odds and ends, but am mostly proceeding as if this is trading-range action.
I'll be looking at some possible buys like Teekay Offshore Partners (TOO) heading into the close, but this isn't a market that will bail you out if you make poor choices.