THE BEAST IS RUNNING AWAY FROM YOU FOR A REASON
I added some SPXU to the mix today. I'm done with adding short exposure for the time being. I don't usually add into declines like today. However, these aren't usual circumstances. Therefore, I am acting in unusual ways in order adapt. I wanted to elaborate on my Quick Thoughts article from this morning. I have an illustration below that will help demonstrate my thinking. In short, there were too many eager sellers (myself included) waiting for 1220-1240 as a point to either lighten up longs or get short. The market, in its infinite wisdom, knows this. It also knows it doesn't have the power to move up through that level and punish investors so that it doesn't make itself into easy prey. So what does it do? It runs away. It runs as fast as it can to the downside. It doesn't give sellers a chance to get in at anything resembling advantageous pricing. That kind of running shows the markets hand. It tells you, as an investor, that the market finds the downside a bit too valuable to give away cheaply. It's giving you long side exposure as cheap as you want for a reason here. It's not because it loves you either. I wouldn't be adding if I didn't think the downside was significant...even from here. click on chart to...
QUICK THOUGHTS
Real quick: The fact that the market refused to get up to the 1230-1240 level is a sure fire sign that too many individuals were looking to short up there and it didn't wanna make itself into a cheap trick. It also means that it had every intention of falling and wanted to do so in the least obvious way. A move up to 1230+ would have perhaps allowed too many to enjoy the ride, as there already a lot onboard the bear train. Also, the way in which it is running away to the downside in the face of obnoxiously bearish sentiment data is a very bearish sign. It means that the market is not flexing or showing its strength/tendency to deceive the way it should. These are matters of fundamental mechanisms that exist within the markets that are being overwhelmed by bears. A sign of a tremendously weak market. It wants lower. I'm holding onto FAZ and EDZ. I may add some SPXU today, at some...
TMV – OUT
Offset by the EDZ and FAZ. Nevertheless, disappointing trade. 3 point loss. Out at 21.50ish.
TMV – ANALYSIS BEHIND TRADE
Below you will find the chart describing the reasons for my long position in TMV from a technical perspective. I said in my post from this morning that I was expecting some of the upward pressure on the long bond to subside in the coming days and weeks. This is due to my opinion that investors will calm down compared to where they are at present. Risk appetites should increase somewhat and the long bond should lose some of the fear premium that is being built into the price currently. Here is the technical...
BUYING TMV
Bought TMV - 3X Inverse ETF on the 30 year Treasury. Took a position around 24.40. Given my strong opinion about the sideways nature of trading for the remainder of August, I expect that some of the upward pressure on the long bond (downward pressure on yields) will subside. 30 year yield (TYX) is sitting at an important point of technical support, as well. I'll post some charts...
FORECAST: CHOPPY SEAS FOR THE REMAINDER OF AUGUST
We're washed out for the remainder of the August. Too many traders and investors have caught onto the bear side of the equation. It's gonna take some sideways chop, with a bullish slant, to shake loose some of the bearish convictions. This is a market where attitudes and emotions seem to flip on a dime. Therefore, I wouldn't be surprised to see a couple weeks of sideways chop, with perhaps a push up to 1230-1240 on the upside being the max for the bulls. Bears won't get anything less than 1170-1180. A fairly narrow range to close out the summer trading season. September is going to be another story, however. I'll have the reasons why later. It may look something like this. Nonsense trading, in other words. click on chart to enlarge Keep in mind that as the chop progresses so will the comfort in the market. We need some level of comfort to clear the way for the next leg down which should take place in September. You can't have an abundance of frightened longs and eager short sellers pressing into declines like we saw today. You know what happens when they press? Just look at the intra-day chart for today. You get a reversal of the trend towards the end of the day. Those so inclined will have plenty of opportunity to position themselves properly for a break of the recent lows. My plan remains the same: Increase short positions via inverse ETFs and exit a majority if not all long...
TODAY’S THOUGHTS
I further continued my routine of liquidating long positions into today's strength. Furthermore, I added FAZ to my growing family of inverse leveraged ETFs. I still have my eye on adding more FAZ and possibly adding some SDS to the mix to round it out. I already have some EDZ from late last week. We did manage to take out the line in the sand for the bears at around 54 on the QQQ today. It was a strong close and the burden of proof is now on the bears shoulders, as the bulls seem to have taken back control for the short term. In the end, these are all short-term problems if you are bearish. The positions I am establishing on the bearish side of the trade are more intermediate to long-term. I am not looking for a quick strike. Rather, I am playing a decisive change in trend that I believe is taking place in the markets for the first time since the 2009 bottom. I will add to shorts using inverse ETFs slowly if the market is to continue to rise. I will also be out of my long positions completely by the end of this week. I am looking to add to inverse ETFs if we manage to hit 1230 on the S&P or if I see signs that we are in the process of breaking down before we get to 1230. Going into September and October this year will be treacherous to say the least. It seems there are a good deal of puts that were purchased during the first part of August that need to be cleared out before downside volatility returns. I'm expecting a break of the recent lows in September. I'm willing to be patient with this one. Got my bear suit on. Zipped up...
8 CHARTS THAT WILL LEAVE YOU NEEDING A HUG
The story this week is in the long-term charts for most market averages. That's where I am looking this week. That's where the real story of the market is told presently. I could dissect the daily charts, but I think they are generally useless given the volatility we have faced. Investors need to zoom out to get the real story. Smooth out the recent volatility. That's exactly what I'm doing. Enjoy: click charts to...
PORTFOLIO POSITIONING
I will be providing updates from time to time as to the general portfolio structure. I have been increasing my allocation to cash over the past couple of weeks. I am now up to 50% cash. I have recently taken a position in EDZ. I have a couple more inverse ETFs that I would like to gain exposure to in the days ahead. I am also looking to liquidate what remains of my long exposure in the market and be net short in the portfolios for the first time in quite awhile. I wouldn't be taking on such positioning if I didn't feel that the downside was substantial from here. A move up to 1200+ on the S&P would not be surprising. A move to 1250 would, however. Expecting to see sub-1000 on the S&P over the next couple of months. What happens from that point will tell us if we are going to test the March 2009 lows. I'll have charts going over the reasons why in my weekly chart review later...
6 INVERSE ETFs THAT WILL PUT HAIR ON YOUR CHEST
The following is a list of 2X and 3X leveraged inverse ETFs that have a good deal of risk, but may prove to be extremely profitable over the next 1-2 months should the downtrend in the markets continue. They also provide a adequate hedge against long exposure without having to dedicate a substantial amount of capital. These should not be positions taken in an account without the discipline of mental stops. They will run you over if you are not careful. For the aggressive, disciplined and experienced investors only. As you will see below I have focused primarily on semiconductors, financials and emerging markets. These three sectors are the weakest. That trend will only grow more pronounced during a further spike down in the markets, as I expect in the coming weeks. Later I will be posting some charts in the weekly chart review showing exactly how the financials and semis are leading us down just as they were in 2007-2008. click on charts to...