February 9, 2014
Weekly Market Outlook
By Keith Schneider
This week was groundhogs day, the basis of one of the best kept secret indicator's used by the only the best Hedge Fund Masters. The only system known to outperform Stat Arbitrage, High Frequency Trading or Insider Trading is this obscure indicator. Traditional use of the indicator dictates that, if the rodent sees his shadow, hedgehog your bets, stay underground for another 6 weeks or until the market thaws out. On the other hand, if no shadow is seen, it's safe to pile back in. Smarter players know that this strategy is correct only 39% of the time and one should do the reverse of conventional wisdom.
This year, Punxsutawney Phil Soweby the renowned groundhog, did not see his shadow and voila', the market responded with a nice snapback, breaking the equities markets nasty downward slide on a weekly basis.
Speaking of going underground, Mathew Martoma, one of SAC Capital biggest traders was convicted of insider trading this week in one of the more massive insider trading schemes ever. Out-maneuvering HFT computers is tricky enough but battling well capitalized players with inside information is another story entirely. Leveling the playing field even a little bit sends the right message to the markets.
The jobs report showed a weak economy even with a higher participation rate, but much of the weakness was blamed on really bad weather, so the market shrugged off the news. Maybe the taper will be tapered if economy continues to slow, which of course is what the market feasted on the last several years, low interest rates.
Gold has poked through an important trend line indicating that the downward slide in the metal might actually be over and at least an intermediate term rally could be underway.
Also noteworthy, is that some bombed out equities such as Mexico and Emerging Markets might have turned the corner as well, showing some decent relative strength in the past few weeks. Biotech's are still on fire. Let's take a look and see what the market is telling at this juncture.
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