Doug Kass: Market Structure Favors the Bold Now
Momentum and the dominance of machines are creating more opportunities than ever. But here's what's required of investors to capitalize on this.
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As I often write I am repeatedly wrong and always in doubt.
That said, there is something — in this world of investment uncertainty — that I am almost certain about!
The dominance of machines — in which momentum (in both ways) is accentuated by products and strategies that worship at the altar of momentum — is producing many more trading and investment opportunities.
These days, the preponderance of passive investing (over active investing) is often taking selected equities to "artificial levels" with greater frequency.
Arguably, several recent examples of this sort of rapid/random/extreme price movement were seen this week when Palantir PLTR and JPMorgan Chase JPM climbed vertically to new highs — and then over the last two trading days have fallen back badly (despite a modest drop in the overall market).
The positive about this, is that if one is bold and has a sense of a company's "intrinsic value" one can capitalize (long AND short).
However, this sort of opportunistic trading/investing requires one to be dispassionate.
It also means, that "fighting" the temporary and often short-lived price momentum in sectors and in individual stocks requires an "averaging in" strategy (something I have been discussing this week in the Comments Section of my Daily Diary on TheStreet Pro).
It also means that sector rotation could become more rapid and extreme.
This commentary was orginally posted in Doug's Daily Diary on TheStreet Pro.
At the time of publication, Kass had no positions in any securities mentioned.
