Tips From Real-World Wendy Rhoades

It was a very busy week/weekend as I first attended NAAIM's (National Association of Active Investment Managers) annual conference. The conference was stellar, and it was great to hang out with so many like-minded investment professionals Sunday through Wednesday.

I picked up some trading psychology tips from Brett Steenbarger, PhD, who was at one time, a real-world Wendy Rhoades for Paul Tudor Jones' shop. One of Steenbarger's major points on the markets was that understanding the psychology of key market participants is critical these days. I found his insight and approach valuable and plan on following his musings on a regular basis at TraderFeed.

For example, Steenbgarger provided some interesting insight into what hedge fund managers are thinking right now. Supporting some of Marko Kolanovic's work that I have detailed recently, Steenbarger suggested that hedge fund managers have missed a fair amount of this year's joyride to the upside and are now busy playing catch up.

Hedgies Trying to Catch Up

Dr. Brett says the hedgies are playing the usual "mo-mo" game in order to attempt to close the performance gap. As you might suspect, this implies chasing the momentum names and "allocating more capital to the winners."

The problem, Steenberger opines, is that hedge fund managers were late to the game and as such, can't afford to take losses/give back gains. This suggests that the hedgies could become the "weak hands" in any meaningful decline. The idea is with hedge fund managers being quick to pull the trigger on the sell side, any downside action in the near-term could become exaggerated.

Another way to look at this situation (my opinion, not Steenbarger's) is "the chase" could keep on keepin' on until (a) the hedgie money gets put to work, (b) the ...

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The Best Recession Ever!

I'm not sure who I borrowed the title of this week's missive from, but I think we all have to admit that this is probably the best recession/slowdown ever!

Instead of the economy flirting with negative growth ...

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Is "Melt-Up" The Operative Word?

We've been talking lately about the idea that big hedge funds and systematic traders have been caught on the wrong side of the stock market's recent run for the roses. The thinking is this fact alone could account ...

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Am I Wrong To Be A Little Concerned?

Well it's official. As of Friday's close (a close that was likely influenced by the quad-witching event and a handful of S&P index rebalances), the S&P 500 is now up +20.05% from the 12/24/18 panic ...

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Let's Call It Constructive

The fact that stocks pulled back a bit last week shouldn't have come as a surprise to anyone. The S&P 500 had enjoyed an historic joyride to the upside in a very short period of time. As in +19 ...

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Thirteen Charts Tell The Story

It is said that a picture is worth a thousand words. So, this week, I've decided to try and sum up the keys to the current market environment with a series of charts and graphs. I started out looking ...

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The Message From The Models: The Bulls Are In Charge, But...

It was a busy weekend of birthday celebrations (we had 2) and important family events in my household (our youngest is moving into her first apartment!) and as such, I didn't take the opportunity to spend a couple hours ...

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Party On, Wayne!

The joyride to the upside in the stock market continued last week as the S&P 500 surged another 2.5%. If my calculator is correct, this means the venerable blue-chip index is now up 10.7% so far in 2019 ...

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Bull vs. Bear. The Line In The Sand?

On Tuesday, February 5 and again on Wednesday, February 6, the S&P 500 bumped into its 200-day moving average. While I'm not exactly sure why this particular indicator captures the attention of so many (there are a myriad of ...

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Herd Behavior

"Herd behavior, or the tendency of individuals in a group to 'follow the trend,' has frequently been observed in equity markets. Herd behavior in investors leads to a convergence of action." [Yan, Zhao, Sun (2012)]


"Theoretical models on herd behavior ...

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Where Do Things Stand Now?

To be sure, it is rare to see the mood of the market swing from the depths of despair seen on Christmas Eve to the "happy days are here again" feeling of last week in such a short period of ...

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All Clear?

The bad news is that after a rather rambunctious rally, the S&P 500 remains -8.9% from its all-time high. The good news is that after the -19.8% shellacking that ended on Christmas Eve, the stock market now starts ...

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5 star all the way. Your insight and knowledge is very helpful. Analysis, charts and conclusions are sound.
         
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