Pakistani Debt Markets are Up 163% and Iraqi Debt is Up 94% This Year! Are You?
Wednesday October 14 the market is going to open significantly higher and create an extremely overbought short-term condition. Whether this overbought conditions run for a few hours or a few days it’s going to eventually pullback and provide some excellent short-term buying opportunities as it has for the past half year.
The longer term concern is the level of froth that’s beginning to enter the market.
Yesterday’s Wall Street Journal articles were focused on stories like Blackstone beginning to take parts of its portfolio public (they caught the market top a few years ago taking themselves public…guys this smart don’t make the Forbes 400 list by selling at bottoms!), along with a story titled “Emerging-Market Debt Boom Signals End Of Crisis”. It turns out there is an insatiable demand for foreign debt in countries like Pakistan, Argentina, Ukraine and what self respecting portfolio manager would want to be caught not owning Iraqi debt (up 94% this year).
Behavior like this is not early bull market behavior where things are often more cautious. This type of froth is usually seen in the later stages of a bull market, not six months in so it will be interesting to see how this plays itself out in the near future.
In the meantime, even though the world has gone from one extreme to another in the past 12 months, our game plan remains exactly the same. We buy ETF pullbacks above the 200-day moving average and short them below the 200-day. 42 of 50 winning trades starting exactly 12 months ago today in the Daily Battle Model Portfolio is proof enough that this is a solid way to trade the markets no matter what the world is doing.
Last October the world was on the brink of economic collapse and money managers couldn’t unload high quality securities fast enough. Today, many of these same money managers who were tossing out the good last year are now tripping over each other buying debt in countries that most normal citizens wouldn’t put on their C list of places they need to visit in their lifetime
Yes, the world has changed over the past year. But our trading hasn’t. No matter what the market brings, we’ve done the same thing every day. And in looking at the performance over the past year, our trading approach has been one of the most consistent performing strategies in the world.
Buying pullbacks and selling into strength (and vice versa on the short side) with ETFs remains the best way to create consistent trading profits to grow your money. Over the past twelve months, one of the most chaotic periods in the past 70 years, further proves this out. Stay consistent with your trading. Quantify your strategies as we do and execute your trades day after day. Yes, the world will continue to bring many different scenarios over the years. But your trading should be a picture of stability. In the long run, it will pay off handsomely for you.
Special Note – We’ll be holding a special one-day seminar at the end of the month teaching how to systematically trade ETFs both on a short-term basis and on a day-trading basis. All the strategies taught are backed by historical test results and include the same strategies used by the Daily Battle Plan Model Portfolio. If you’d like to attend a free presentation on the seminar, please click here for details.
Larry Connors is CEO and Founder of TradingMarkets.com and Connors Research.