What Made This Bear Become a Bull?
Let's review a huge winning trade made by Doug Kass this week.
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How to turn a bear into a bull
What. A. Week. Officially, stocks entered a Bear Market on Monday when the S&P 500 slipped to as low as 4835, off 21.5% since the February high.
Doug Kass has been bearish since the start of the year, and we’ve shared his point of view many times.
The thing people really needed to know was what would make Dougie turn bullish. It turns out, the best thing to turn him from bear to bull is a big sell-off. And that’s what happened.
On Tuesday, Doug wrote an entry in the Daily Diary titled, A Bear Turns Short-Term Bullish, outlining his case for an upcoming rally.
His argument centered on the following:
- Extreme Sentiment: My Fear & Greed Index had fallen to 3. The VIX was at 60. The AAII sentiment survey was very negative. And the S&P Short Range Oscillator was very oversold.
- Weak Technicals.
- Reactions to bad news had begun to improve. When bad news is no longer a reason to sell, it’s often a reason to buy!
- Peak Tariff Concerns: Dougie felt that the tariff hard-line would be softened.
This post was shared in the morning on April 8th. That day, stocks opened higher and then continued to sell off, though there was less panic than had been seen on Monday. Doug had been a buyer on Monday and continued to buy throughout the day on Tuesday, adding to SPY, Financials, and Technology in the late morning and through the afternoon.
It worked out pretty well and Dougie took profits on Wednesday, while stocks ripped 9.5% higher.
Well done Dougie and all of the Diary participants who went along with him!
One of the things I appreciate most about working with him, is that he’s transparent. Dougie is that rare analyst who trades in real time and tells us not only what he’s thinking, but also what he’s doing.
If you’re not following him, you should.
Dougie tells us that we’re still in a bear market, and I agree. Valuations have improved, but geopolitical risk is so high and there’s so much uncertainty around tariffs. We just don’t know, from day-to-day, what Washington will say. I don’t know how business leaders can plan around that.
If you want to understand more about Doug Kass' stance, you should check out his article from Thursday, titled We Rallied, but it's Still a Bear Market.
Have a restful weekend. These are interesting times.
