Longs Shrink, Shorts Grow and Trump Towers Fall

I took the dividend and profit on IBM and clipped another item before it could start rolling up a loss.  I think that precious metals will bounce, but they are broken.  If the bearish precious metals and weakening Trump Trades result in a market correction, the precious metals will lead the next upturn down the road.  Again, gold led the broad markets in December of 2015 to 2016’s ultimate upside and in an ideal world it would lead to the downside as well (esp. if silver continues playing downside catch up vs. gold).

I am not planning to short the PMs anymore, at least until/unless said bounce gets here and plays out.  I did increase my broad market shorts though, adding one against the Semiconductor sector.  I mean, NFTRH was first to be bullish on the Semis nearly a year ago, so why not try going the other way?  SOX has exceeded target and is losing momo vs. the NDX lately (the progression of leaders roughly being SOX→NDX→SPX).  So now it’s short the Semis, the S&P 500 and Emerging Markets.

My technical caution is that the S&P 500 looks like it is neatly consolidating in a bull flag, not correcting.  But we’ve lost the EMA 10 for the first time since the end of January and given the hype fest last week as Trump showed his sensitive side to congress and the market exploded upward, only to be immediately reversed, I think this has the potential to be more than just a little love tap of the EMA 20.  We’ll see, because we’ve got jobs tomorrow, FOMC next week and a lot of noise built in.  But add in the 8 year bull birthday news going around and the fact that some genius long ago projected a 2410 target “by March/April” (the timing was added more recently) and just maybe…

spx

The one thing hanging me up is the FOMC noise and interest rates.  Homies and Healthcare, which are positively correlated to lower interest rates are rising and yet the bond market does not (yet) seem to believe that the Fed is going to back off on its policy tightening.  Maybe Payrolls will have something to say about that tomorrow or maybe a strong Payrolls puts FOMC probabilities at 100% for March, signaling Peak FOMC jitters as well.

Regardless, cash is my friend here but I am hoping to be able to lean further into a short the market mode as we clear Payrolls and FOMC.  That could include the precious metals as well, if they bounce but remain trapped below key levels. The thing with gold though, is that if the market goes bearish for more than a correction (not yet a favored scenario) it becomes the ‘go to’ item.

Speaking strictly on intuition, I think that anything painted with the Trump brush since November could get hit worse than other items (they already are, except for financials, which are interest rate dependent).  After all, look at Healthcare remaining stable and the great America ‘build out’ materials declining.  It’s not my bias talking; it’s the markets.

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