RISK ASSESSMENT THURSDAY
On the 3rd trading day of each week, I like to assess the risk in the portfolio to see what positions have the chance to cause the most harm going forward. Today was risk assessment Thursday. It came and went without any action, whatsoever.
I'm holding a macro portfolio currently. I feel that this will be the way to allocate funds for the near to intermediate term. Individual stock opportunities have too much individual risk with the scope of earnings warnings and uncertainty with respect to most industries. The macro picture is much clearer here. I think there will opportunities to play from both the bull side of the trade (where I am currently) and the bear side of the trade in coming months. Yes...it's going to be that kind of market.
I am holding fairly concentrated positions in EUO, TMV and DZZ. This portfolio is essentially a bet on the great aversion to risk trade dissolving in the coming weeks, creating a crumbling effect for "safety" assets. Gold and long dated US Treasuries are extremely vulnerable.
The trade in EUO has been working out well. I announced the trade on the day I got smashed on the short side of the market. There continues to be value in the US Dollar as I have been saying for the past couple of weeks. The breakout today was significant. I will have charts this weekend.
I expect the bullish side of stocks to be THE side for the remainder of the month. I think we are in for a substantial rally as the aversion to risk amongst all of Wall Street has grown to the point of being absurd. The economy and financial system literally has to start dropping bombs in order for further downside to take shape. There are simply too many people already out of the market or short to create any significant selling.
This doesn't mean that the market is done on the bear side. Over the long-term, we may just be getting started. However, a rebalancing of sentiment does need to take place before any further downside takes place. I expect to see that into the middle of October.
Lots of charts and further commentary this weekend.
