THE PRAGMATIC CAPITALIST » » TRADE OF THE DAY: THE BETA TRADE REVERSAL

TRADE OF THE DAY: THE BETA TRADE REVERSAL

17 August 2009 by TPC 4 Comments

As the beta trade reverses we’re likely to see the highest beta names overshoot to the downside. If this in fact the beginning of a new downturn in stocks it might be wise to pick thru the names of the most highly shorted stocks. The chart below shows the outperformance of high short interest stocks during the recent rally. You’ll also notice the sharp underperformance during themost recent downturn. As the old saying goes, what goes up must come down….

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4 Comments »

James said:

So you are really betting that this is the time to short stocks and the markets?

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# 17 August 2009 at 3:11 PM

TPC (author) said:

Just throwing an actionable idea out there since a lot people are talking about getting short here. Personally, I’ve been pretty clear that I am not getting aggressively short….

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# 17 August 2009 at 3:16 PM

James said:

TPC see, that is what makes me worried. That a lot of people are thinking about getting short…

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# 17 August 2009 at 5:42 PM

Speedy Gonzalez said:

I fully agree with James, there is a lot of people expecting the market to go down…In my modest opinion it will only go down when no one is expecting…GS has mention a short term target for the S&P of around 1050. Does anyone want to bet that it will reach that level???
Just to mention that I am completly bearish regarding the economy…