nftrh plus

NFTRH+; Updating Banks/Financials Short Setups

This NFTRH+ update is emailed to the entire subscriber base (an earlier one was stock-specific and sent only to subscribers who’ve opted in for email delivery) because it is macro related (interest rates and by extension, tactical portfolio adjustments).  A reminder that all NFTRH+ updates are available to all subscribers directly at the website as well. 

Last week we had our first short setup update in a long while.  We looked at the Vampire Squid, Goldman Sachs (a former NFTRH+ long idea) and the Bank ETF, KBE.  With respect to GS, we noted…

I would say that a 2nd drop below the SMA 50 would put GS on warning, technically.

Here is how it closed today. Consider it on warning.  KBE also closed below its SMA 50.  Additional factors are the negative RSI divergence to the recent higher high and the declining volume since the big post-election surge.  If that volume had diminished while GS made a down trending bull flag for example, it would be bullish.  But the volume divergence came with a higher high.

gs

As you know, I am already short because I wanted to press my bullish bonds / bearish yields (contrarian) macro view, and the Banks/Financials do not benefit from rising bonds (declining yields).  If GS, KBE and the like do not quickly re-take the SMA 50s (ref. the end of January event, when it negated the breakdown within 3 days) the picture becomes more bearish.

Leveraged Financials bear fund FAZ has an interesting little pattern forming as it made its first close above the EMA 20.  Rather than going for this, I just shorted the unleveraged XLF straight up, to play it more conservatively.

faz

I am still just trying to stay balanced with the market, not play hero from the short side.  A good deal of this has to do with interest rates. I want to generally be long (longs significantly outweigh shorts) items that either do better in lower rate environments or look to be gaining the ‘rotation/rebalance’ bid (like the boring items noted).

If the pro-bond, anti-yield view proves well founded, the Financials/Banks are at risk because they became as fiercely overbought as the rising interest rates hysteria was itself, fierce.  Sort of a complete opposite to last summer’s ‘everybody into risk off bonds!!!’, eh?  If the pro-bond view proves wrong and GS for example, retakes its short-term moving averages (EMAs 10 & 20), which are now rolling over, then the trade may fail.

It has been a battle for me trying to fight these pigs by owning TLT.  But the contrarian aspect has been too tempting to ignore.  So again, I am simply shorting what I think stands not to benefit and am long areas that I think the market could rotate to.

I am not recommending shorting for most people.  That is what cash is for.  But for those interested, the setup in GS, KBE, XLF, etc. may be taking shape.

A reminder that chart based NFTRH+ updates are technical trade setup ideas, which may not be revisited as the buy, sell, stop parameters are already noted. They are meant as a starting point for further research if interested. I will not personally buy every item highlighted and will sometimes sell – without prior notice (because this takes time and resource away from NFTRH’s main functions) – any item that I do buy, below target, which is something I often do as a trader. Also please be aware that I am not a fundamental stock analyst. Due diligence is your responsibility.