3 MONSTROUSLY POSITIVE TECHNICAL EVENTS LEADING TO AN ORGY OF BULLISHNESS
The end of the consolidation fell onto the lap of the bulls today...right on schedule. That schedule was mentioned here and on Twitter/Stocktwits numerous times since last week: And here again http://www.zenpenny.com/wp-content/uploads/2012/08/DOW6.gif And on Sunday for good measure http://www.zenpenny.com/wp-content/uploads/2012/09/SPY.gif The significance of today's move up should not be taken lightly. It was perhaps the most significant technical event since the low for the year in early June. I would say that it was THE most significant technical event of the year if the Dow had decided to join in a break of the ever-important pink trajectory, pictured here. What we got today was the following: 1. The S&P 500 screamed upwards. A fantastic breakout above a tight consolidation range. 2. The Nasdaq Comp destroyed its generational trajectories. Those trajectory points are picture here. More significantly that destruction of the trajectory points happened on an enormous expansion of the daily range. Makes it all the more significant. 3. The VIX got pummeled right as it touched its generational trajectory. I'll have a review of that in the weekend chart review on Sunday. The leaders in this orgy of bullishness: Semiconductors, financials and small-caps. The nefarious threesome that always shows up to these events, bringing the full cadre of heat to the awe-inspired spectators. You know who I see missing out on this rally? All the supposed braniacs that like to think more than they like to make money. Those who put intellectual ego ahead of what the market is telling them. I apologize in advance, but you have to be A) a mouth-breathing invalid B) a knuckle dragging troglodyte or C) a relative newcomer to investing to have not seen the fact that this market was begging for this outcome. Since a majority of those I see are not newcomers by any stretch, I have to imagine that Wall Street is a breeding ground for invalids and troglodytes. A fact that I would be 100% content with if only they would admit their tendency towards erroneous judgement (mouth-breathing) and foolish behavior (knuckle dragging). Instead what you get is a vast array of elaborate justifications for how, what and why of a rigged system that only faces one eventuality: destruction. You get maniacal reasoning, coated in pseudo-intellectual jargon to somehow validate the erroneous assessment of those who keep getting the markets wrong. As we have found out over the past several years, there are lots of ugly things about the financial markets. The one elegant trait. That piece of beauty that can never be denied is the fact that you can't lie. The market will grade you immediately, regardless of class, creed...
PORTFOLIO UPDATE
During the trading day, I tweeted the following: This was an addition to SPRT. The original position was taken on August 7th between 3-3.10. Following this buy, I am now 100% invested and hope to stay that way for sometime to come. The completed portfolio consists of the following: BWC, SPNS, SPRT, PXLW, WMIH, ATNY A concentrated and well-researched portfolio that has all the potential to run from...
QUICK THOUGHTS
I may not escape this pullback unscathed. My short-term trend indicator is a couple days away from turning to bearish. As you know, this completely contradicts my personal opinion about the direction of the markets. Personal opinion doesn't matter, however. My system of controlling risk is my system of controlling risk, taking precedent over all else. If I do get a confirmed signal, I will move to 75% invested from the current 95% level. I will also initiate a hedge to cover the 75% invested position on a dollar for dollar basis. As I have discussed previously, there have been numerous close calls in 2012, where both my short and intermediate term indicators have looked like they were going to flip and have remained bullish. I am hoping that this will be another close call. By the looks of it, we are setting up for the perfect low on a time and price basis either tomorrow or Thursday. I continue to expect that to be the low for the month of September. There have been slim pickings in terms of new small-cap investments. Once my trend indicators firm up a bit, I may put some money to work in KKD as a long-term play. I also have interest in YELP once again, if it moves into a favorable technical position. If you'll remember, I originally published research on YELP in April. I sold it for a loss sometime later. It is too erratic to make into a large position. However, I believe it will be long-term winner. Worth taking a small position in over the next few weeks. This has been a good year up to this point. I plan on making it a great year in the months ahead. I don't see anything that can get in my way other than myself. I'll keep an eye on...
6 CHARTS THAT MAKE A TYPICALLY DIFFICULT SEPTEMBER INTO ICE CREAM AND CAKE
click chart to enlarge
AUGUST MONTH END SUMMARY AND LOOKING AHEAD TO SEPTEMBER
August Performance: -0.34% S&P 500 August Performance: +1.98% YTD Performance: +42.38% S&P 500 YTD Performance: +11.85% Portfolio Highlights For August: - A new position was taken in PXLW at an average price of roughly 2.80 at the beginning of August. PXLW specializes in enhancing video quality, with an increasing focus on the mobile market. Fundamentally, the company possesses all the attributes I like: Cash flow positive, earnings increasing across top and bottom line, zero debt, positioned well for tech spending, niche business, insider buying, and an activist hedge fund involved. On a technical basis, the price and volume patterns are confirming the positive fundamental picture. PXLW has already achieved a 20% plus gain since initiating the position earlier this month. It is currently the largest position in the portfolio. - SPRT was re-initiated at an average of roughly 3.05. This has been the go to stock when exposure is necessary since the research report was published in late January. I have traded in and out of the company numerous times throughout 2012, each time with a double digit percentage profit. - SPNS, initiated in mid-June, managed to finish the month with a 6% gain. In August, The company reported a 91% increase in revenue and an 77% increase in net income versus Q2 2011. Additionally, they increased cash balance by $10 million over the past 6 months with zero debt. The CEO remains bullish on the prospects for the company. Who can blame him? SPNS is in a prime position to take advantage of a much needed IT upgrade cycle taking place in the insurance industry. - During the first half of the month exposure increased from 70% invested to the current level of 95%. This is in line with where I want to be at this stage of the market rally. My mechanical trend indicators are all in a bullish stance, which demands a 100% invested position. They are, however, beginning to see some signs of a reversal, which is at odds with my opinion of where the market will go over the next couple of months. Bottom line is that the mechanical trend indicators dictate my exposure levels. If they begin turning over the next couple of weeks, the cash position in the portfolio will increase and long exposure will be hedged. Portfolio Lowlights For August: - WMIH finished the month of August down 16%. This is not unusual for a company listed on the pink sheets. Volatility will be substantial until the company becomes listed on a major exchange, which I expect within the next 12 months. WMIH is a long-term holding, as stated in the research report from July....