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  1. Home
  2. / Investing

Here's My Market Thesis and Strategy

I believe we are going through a corrective process right now, which is triggered in part by seasonality.
By JAMES "REV SHARK" DEPORRE
Sep 14, 2021 | 01:15 PM EDT

I actively avoid making market predictions. I have no idea where the indices will be months from now, and I believe it is futile to even guess. However, I still have to develop trading strategies, and that means having some sort of market thesis in place. If I see evidence that my thesis is incorrect, then I can shift my strategy, but I need to formulate a general theory to use as a framework.

My view of the market right now is fairly simple. I believe we are going through a corrective process right now, which is triggered in part by seasonality. We will see many different reasons stated for the market action, but primarily it is just the natural ebb and flow that occurs. We need periodic down cycles to set up the next cycle.

I'm not going to try to guess how long this corrective cycle will last or how deep it will go. I do not think we will see the start of a significant bear market, but that is always possible.

With that thesis in mind, my strategy is pretty easy to formulate. I'm holding highs levels of cash. I have some positions in a few favorites that I'm willing to add to as they develop. I am not in any rush to ramp up my long exposure until I see better price action. There will be some upside action that will try to suck us in during the short term, but I don't expect to see a good, sustained upside to build until after third-quarter earnings start to hit.

That is my market thesis and strategy. Now I have to execute on it. That means managing the positions I have and not letting any losses grow too much. I want to keep my precious capital safe and be in the position to be aggressive when things improve, which I think may take a few weeks.

Currently, the indices are rolling over again, and we have another intraday reversal to the downside. There has been a series of these in the last two weeks, and it is a clear sign that corrective action is playing out. It is exactly what is needed, but many folks become frustrated and impatient and want it to end.

I'm going to try to find some short-term plays to focus on, but as far as building longer-term positions, I'm not going to do very much right now.

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At the time of publication, James "Rev Shark" DePorre had no position in the securities mentioned.

TAGS: Investing | Markets | Stocks | Trading

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