We covered the gold sector last night and I think that was all I had to say about it for now (short-term over bought and prone to eventual pullback, long-term the odds have increased that the bear market is ending). But there have been other areas that are in flux as well and I wanted to review a couple of things.
I have been long TLT and short KBE in line with a deflationary view and declining interest rates. As noted in a post at biiwii yesterday, I covered the GS short and sold the TLT position (while retaining TIP) in order to get cash levels higher. Today I also took profits on the Emerging Market bear fund (EEV) and covered the short on KBE.
I wanted to point these out because they have been firmly held through the market volatility, but today I am not sure whether the market is going to break down or finally get a bounce (from the bottom re-test we speculated about in NFTRH 381). Also, TLT remains technically bullish and KBE technically bearish. But I want cash as my vast majority position right now.
So many charts look quite bad out there, but I do not want to be greedy and I am going to keep these gains. This includes in the gold sector, which I was not heavily involved with but was profitably involved with. Aside from selling LSG yesterday, I increased short-term hedging there from partial to near full. I would like to add pullbacks in individual items against this hedge, if applicable (i.e. if I am not wrong about over bought view). Ref. favored miner NGD is already more than 10% off its high, and also recall the AAU chart shown yesterday, which swung down over 12% within the day.
In general though, my plan is to find a comfort zone where I am flush with cash and where the volatility will not have much affect. I do not want to try to trade every daily squiggle in these markets. I have two un-leveraged short positions left and no longs (limited losses taken on a couple longs I had yesterday), excepting the gold sector, where a few longs are held and the shorts are strictly to hedge.
I may swing long for a market bounce or add short if the thing breaks down from major support (i.e. if SPX follows broader indexes into breakdown mode). But I am profitable for 2016 and aim to keep it that way, so 100% cash is always an option as well. We don’t have to trade every day or every week. It is going to be a long year with plenty of setups to come. I for one will not over trade, and recommend you don’t try to either.
Meanwhile, when notable things happen we will of course update the picture.