Stick a fork in it. 2014 is in the history books and, despite the positive returns, many folks are happy to bid it adieu. We had V-shaped moves, stealth corrections and joyless rallies that brought new all-time highs. Biotechnology was the hot group, while oil surprised many with its collapse. Central bankers continued to drive the action with the Fed becoming more hawkish, but the rest of the world's central bankers rolled out their own forms of quantitative easing.
Trading was challenging at times in 2014, but that is why it is so potentially lucrative. If it were easy, you wouldn't be able to make big money doing it. Trading is still the best job in the world, even though the market often feels manipulated and random. No other job offers the same payoff. There are no sure things, but hard work is always rewarded over time.
The only thing I know for sure about 2015 is that it will offer a new set of challenges. If we are ready to work, we can make money. We get a fresh start Friday, and our success depends solely on ourselves. Up, down or flat, we can always find opportunities if we work hard enough.
Have a great new year. I'll see you Friday.
Dec. 31, 2014 | 12:24 PM EST
Welcome to Tombstone
- It is practically a ghost town, so let's look ahead.
It is practically a ghost town out there already and the trading is becoming very unstable as market players make their last moves of 2014.
We still have good breadth and quite a bit of action in biotechnology names, but it can be dangerous if you try to be too aggressive. I added a few things this morning, but my main concern right now is not to take any unnecessary losses.
This is obviously the time to start looking ahead to 2015. I purposely avoid making any sort of predictions. I have no idea what is going to happen. The way to be successful isn't to make some grand prediction. The key to success is to be mentally and emotionally prepared for whatever the market throws at us.
The good news is that there are going to be some ups and downs in 2015. I think it is likely they will be even greater than what we saw in 2014. As traders we should be excited about increased volatility and more vigorous debates between the bulls and the bears.
My focus here will remain focused on ways to improve our trade. Our job is to navigate whatever the market throws at us. The best traders aren't psychics. The best traders are those that are decisive, disciplined and keep an open mind. Success is about adaption rather than hoping things might play out in a certain way.
I know that many of you are heading out early today and I want to take this opportunity to wish you the best in 2015. I don't know what the year will hold, but I'm excited about the prospects and I hope you will join me in having the best year of trading ever.
December 31, 2014 | 10:27 AM ET
Focusing on Some Smaller Trades
- We have some momentum in biotechnology again.
It is extremely slow trading again, but we have a positive bias, despite a weaker-than-expected Chicago PMI number. Breadth is running about three to two positive, but we have some pockets of momentum in biotechnology once again. Biotechnology has been the best momentum group all year. It is fitting that we end that way as well.
Oil-related names continue to bend under heavy selling pressure, but we have some strength in retail, which loves those lower gas prices. Otherwise it is just a mishmash of action out there, as market players make moves for reasons that have little to do with technicals or fundamentals.
I'm focusing on some smaller trades. The Juno Therapeutics (JUNO), bluebird bio (BLUE), Kite Pharma (KITE) trio is hot again and I'm adding to TG Therapeutics (TGTX) in the same group. Also MiMedx Group (MDXG) and Sucampo Pharmaceuticals (SCMP) had news and are seeing some attention.
Neonode (NEON), from yesterday gapped up nicely and I took some partial gains. This one should remain in play going into the Consumer Electronic Show Jan. 6.
It is going to be dead out there by the time we close, so keep a very tight leash on those trades.
Dec. 31, 2014 | 7:41 AM EDT
Watch Those V-Shaped Bounces
- They can be self-fulfilling up to a point.
Whatever happened over this past year, be thankful for where it brought you. Where you are is where you're meant to be.
We shut the door on 2014 today, and for many market players that is good news. The folks in the media celebrate positive returns for the senior indices, but it was a tough year for many funds and active traders. While the folks in index funds celebrated, many active fund managers suffered their worst relative performance in years.
The challenge this year was that the indices simply didn't reflect the action in the average stock. A smaller group of bigger cap names drove the indices, while the vast bulk of stocks did little. Five times this year we had corrective action, and in each case it was small caps and momentum stocks that led to the downside and suffered most of the damage.
A good illustration of how the indices aren't reflecting the action of individual stocks is an indicator on TCNet which tracks the percentage of stocks trading over the 40-day simple moving average. At the close yesterday it was at 53.03%. In other words, nearly half of the stocks in the market are showing little momentum, while the indices are all close to all-time highs.
The other significant theme this year was the continued tendency toward V-shaped bounces. Not only did the V-bounces continue but they actually were even more intense. The bounces in February and October were extremely lopsided and lasted far longer than many thought possible.
Back in January I incorrectly predicted that we would not have V-bounces like we did in 2013. It is a good example how traders always have to be ready to adapt as market conditions develop. In January my logic was that with the Fed becoming more hawkish, there would be less liquidity to drive these bounces. But the Fed moves slower than anticipated and central bankers around the world started their own QE programs.
Traders have grown so used to V-shaped bounces that they are likely to make them self-fulfilling to some degree in 2015 -- but this is one theme we need to watch very careful. Once it shifts, we will have a very different sort of market.
The biggest lament of many market players continues to be that the action feels manipulated and artificial. Many bulls shrug that off and attribute the positive action to a growing economy, but the critics have little problem finding flaws in the idea that the economy is booming.
It should be a fairly dull day as we wrap things up today, but there is likely to be some randomness as market players make last-minute adjustments. There should be a few pockets of momentum as traders look for action, and there is going to be some grumbling about how ridiculous it is to have a full day of trading on New Year's Eve.
If you are heading out early, I want to wish you the best for the year ahead. I hope you'll join me in making the best year ever.