Karpel’s Corner: Who says the markets are mean reverting?

Welcome to Karpel’s Corner. This is where I throw out my thoughts on the markets and share some of my favorite strategies. I keep it market-focused, and never miss an opportunity to teach trading strategies and commentate on the latest trends affecting the financial markets. Hope you enjoy today’s post!

Statistics 101 tells us that the markets will revert to the mean. But the age-old question is: When?

Well, it was not yesterday. The Nasdaq ($QQQ) finished on the plus side, and the S&P hovered right around break-even.

With volatility up, the Long bonds ($TLT) up, and the market holding pat, the prudent trader will keep the powder dry and start to build up some cash. In these frothy times, you can position for only taking high probability,70- to 80-percent in your favor, type of opportunities.

For the Bulls, take a look at Michael Kors. $KORS has already been making a solid short term move after a pullback and, based on our scoring, has the highest score for 1- to 3-year period.

For the Bears, take a look at Transocean. $RIG has the highest probability of making a potential bearish move over the next 50 days.

See you next time at the Corner!