Monday, November 18, 2013

The 1999 Rules

Another day, another new all time high.  ICLD is gapping up 40% after already going up over 200% on Friday.  A move from 2.55 at Thursday's close to 13.50 at today's open.  Over 500% in less than 2 trading days.  Animal spirits are out.  Gaps up are the norm.  The more daytraders that trade the stock, the higher the gap up. This was what happened in 1999, when there was nothing "bad" on the horizon.  Daytraders get bold, and drive up momentum pump and dumps to extreme levels.  

1. If you feel the urge the short, wait a few hours and short when it's 10% higher.  
2. Buy the close on the flavor of the month daytrader stock.  Sell the gap up open.  
3. Forget the sentiment polls, put-call ratios, and overbought levels. Only short when stocks seem like they will never go down. 
4. Don't think this has to end soon.  It won't.  
5. Fundamentals will not matter, investor psychology trumps everything from now on.  

We have reached escape velocity on the stock market.  Normal rules do not apply, you have to pretend like you are in outer space, because the movements will be abnormal.  The bubble is now pumping full throttle, embrace it, because it won't end soon.

No comments: