James “Rev Shark” Deporre says that investors who’ve focused on rotational action and shifting themes are the ones who’ll thrive -- but they’ll need to keep an even keel.
“Bears always sound smarter than bulls,” Deporre wrote in a recent Real Money column. “Negativity and pessimism tend to sound more logical and compelling than optimism and positive thinking.
The arguments for a market correction at this point are very hard to refute, Deporre adds. “The indices and many stocks are extended, negative seasonality is at work, the Fed is ready to taper its bond-buying, valuations are extreme in many cases, and the Delta variant of COVID is hurting the economy,” he said. “How can this market not correct very soon?”
Anyone dependent on leveraging the indices in this market will likely be sorely disappointed, as Deporre describes them as “useless” right now.
“We started off with some great stock-picking and speculative action in the first couple of months of the year, and then big-caps continued to drive the indices higher while secondary stocks corrected deeply and even fell into bear markets,” he said. “In the last couple of weeks, the "Snake Bite Bottom" occurred, and small-caps, growth stocks, and speculative names have come roaring back while the indices have slowly continued to ramp higher.”
The way forward? Avoid market timing and focus on making a profit.
“The market is entering one of the slowest times of the year right now, which comes to an end when third-quarter earnings hit in mid-October,” Deporre said. “It seems to make sense to look for softness in the indices. The problem is that there has been great trading action outside the indices and the big-caps. That is what you should be looking at to measure the health of this market.”
