Let's take a step back before we begin to understand how I arrive at the conclusion laid out here.
On December 31st I put out an article titled: How Everything That Happened In 2018 Makes Technology Names A Screaming Buy
In the article I said, "The buying opportunity here for technology, in particular, is one of the best over the past decade. Whether this assessment of risk/reward ends up being something that lasts one quarter or the entirety of 2019, I am not sure yet. However, a buying opportunity it is and I have taken advantage through broad based exposure to leading technology names including NFLX, INTC, BKI and AVGO."
Here we are close to mid-year, with the rally that has taken place up until recently exceeding even my ultra-bullish expectations.
During May we have crossed a certain threshold that I frankly didn't expect from this market all year.
Let me explain: Whereas the market was demonstrating a preponderance of bullish symmetry at the December lows and in the months that followed, it is now showing nearly identical BEARISH SYMMETRY at the recent highs.
Just a few weeks ago I watched as the markets approached critical resistance at 2950. In fact, I spoke about the only crucial resistance point for the market in February on Twitter:
The recent high for the SPX was 2954. That high not only nearly perfectly matched the substantial resistance point mentioned, but the ensuing "thrust" that occurred created a pattern that results in one of the following two scenarios sticking over the next few months:
- The markets chop around in a volatile, sideways range
- The markets have seen their highs for 2019 and will continue to drop into the summer
In any case, the time to be offensive has surely passed. It is now time to reign in longs, focusing on defense and capital preservation.
Value beats growth. Trading beats investing. Selling short has an opportunistic place in portfolios. Being bearish isn't necessarily a bad thing, whereas it was a cardinal sin in January.
On the positive side of things, housing names continue to exhibit inordinate strength and select SaaS names look tremendous, with my personal favorite being PAYC.
Tread lightly.
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