A Great Day in the Market! So What?

This is one of those posts that started out as a regular blurb and then it just wouldn’t stop talking, rambling on, getting a little preachy here, promotional there and ultimately, maybe useful to some people too. Sometimes you’ve just gotta write ’em and send ’em out into the world.

Today was my best trading day of the year (although I didn’t actually make a single trade). I don’t tend to measure what I am doing trading-wise, by the day. Sometimes I measure by the week or month and often, by the intermediate (2-4 month) cycle. But the ideal is to get the macro right, lock and load for a new extended cycle. The last one of those was in Q4 2008 – Q1 2009. I did well with the gold sector, profiting greatly and protecting most of the gains.

I did not so great with the stock market, with which I’d have only needed to buy the indexes and hold per my then-bullish view. I ended up putting a lot of effort into under performing. Ah, hindsight. We learn. The chink in my armor was my view that pure monetary policy could not continue to drive markets for this long.

Dialing in to the now, today was good because despite shorting SPY as noted yesterday, the gains came from several stock holdings that I have hung tough on or added on opportunity, along with the leveraged short in crude oil and straight, unleveraged shorts in commodities (DBC) and gold miners (GDX), taken against a few quality miner longs that I’ve refused to sell despite the still-bearish sector situation per ongoing technical and macro fundamental analysis. The gold sector’s time will come, but first the star of our show may need to flame out or at least begin chronically under performing.

Speaking of the star of our show, SPX is at a new all-time high, finally cracking our long-standing target of 2410, and I held the short with little apprehension as the whole of the portfolio did well and I am considering a short against the US market to be an initial step, unless today’s pop proves not to be a bull trap, in which case ‘I’ll take Mania for for 2500, Alex’ (and get out of the way).

SPX is either making a bull trap or preparing for the next stage of the mini mania that could morph into a full-on mania. This is the battle of bubble heads (armies of new traders twittling ever-more impressive charting tools, talking the talk but maybe not all yet knowing the feeling – and capital loss – that comes after momentum finally flames out) vs. dour bears and educated market students well versed in risk management.

spx

The second group noted above has been schooling since last summer’s Brexit volatility that the market is fundamentally bearish, or at least, over valued (it is). We on the other hand got bullish the leading Semi sector almost exactly a year ago, and have remained bullish (with the trend) the broad market ever since.

Don’t misunderstand; risk is very high and that is a fact of manic bullish life. How high was risk for the Nasdaq in December 1999? Massively high, even though the eventual top was not hit until a few months later. So risk management (recommended as routine profit taking, sector rotation and cash management) must be in play right now. If you’re not managing risk, you are doing as casino patrons do, gambling.

Well guess what? Momos, casino patrons, substance freaks and Ma & Pa don’t care about theory or risk management; they care about making coin! ‘This market is ripe for the taking’, think they. That is what already-high prices do to many people’s otherwise common sense. The lesson will be harsh when it comes, but for now right is right and wrong is… not right yet. You see?

Instead of laboriously listing in NFTRH the things that one faulty trader has bought or sold in the preceding week, I’ve been routinely charting stocks that I either hold or am watching (for either long or short positions) and giving a brief interpretation of buy, sell, support, resistance and/or general status on each. It’s more fun for me and I think subscribers like it better as well.

I am also adding new charts that show a sector ETF in the top panel, along with the top stock components of said ETF in the lower panels. It is another way of getting more descriptive about the market’s ultimate components, which would be, err… stocks.

For example, here is the Financials SPDR followed by its 4 largest stock holdings. Not very bullish looking, are they? The point is that it could be a developing bear opportunity (I shorted XLF on spec) or if these things reverse the bearish patterns we’d want to be right on top of it.

xlf

We are doing the same across many sectors, in service to both bullish and bearish views. On the bullish side, I’ll be adding the Medical Devices iShares (IHI) and several of its stock components (many of which have been noted in NFTRH over the last year) in order to track this sector that we became bullish on well before the herd. It is overbought now, but the last great opportunity was the bottoming pattern that formed in November-December with the final opportunity coming when Trump gave his first press conference, said “Pharma” and they (man, machine and casino patron alike) dropped the sector even though as we noted at the time, its fundamentals, unlike potentially “Pharma” (though I have my doubts Trump will back up his words with action against big Pharma), stood to gain under a Trump administration.

This market is not a game, as I think some of the casino patron contingent might see it. For intermediate traders like myself, it is about managing risk, being on the right side, booking profits and making no friends (for example, I learned a long time ago to tune out the promotional gold “community” and all the group think it entails). I also realize that by insulting half of everybody in some of these articles I don’t always make friends in this format either. Hey, better that than to be glad-handing promoter.

Above all, the mainstream financial media should be treated as the clown show that is (I’d bet that pound for pound, the entirety of the financial blogosphere is far superior, as is serious research from independent investment firms). How many times do we have to call contrary b/s to the MSM? “Global NIRP! Buy bonds!” (they tank). “Bond bull is over, interest rates going higher!” (bonds bounce as yields drop). “Trump said Pharma!” “Britain is leaving the E/U!” and on and on it goes; opportunities all.

You must separate from the herd because with all its newfangled charts, momentum and self-reinforcing sentiment it is going to be wrong, whether the situations in question be bearish or bullish. Why just last week we had the “Trump-Gate Impeachment!” mini mania. It was a short-term opportunity not to panic or if day trading, buy the fear. ‘But Gary, it has been and still is right to be a bull and the herd is bullish!’ I am bullish too, but give it time. The worm will turn eventually.

For no reason in particular, here are my current holdings during this particular snapshot in time. I’ll probably pop the updated view in at the end of each NFTRH report going forward.

Brokerage account…

Bought Africa due to a constructive weekly chart, BBRY for fundamental reasons some time ago, bought CSCO back just in time for the big drop (and bought more), GNUS is a rank speculation, bought Biotech and on the fence, INTC targets higher, MZOR (ISRG wannabe) as a speculation on a buying opp as noted in NFTRH, PNR because… the weekly chart, SCO to short the oil hype at the technical shorting opp noted above, SIMO and TSEM are doing well in the Semi space and MOZ.TO and WDO.TO are the two gold stocks I’ve held on to. Also, FAZ is there to short the Financials unless the chart above neutralizes the bearish state of things (a confirmed bear phase does not ensue unless the April lows are lost on XLF and associated stocks).

brokerage

IRA…

AAU went up as the miners went down. Is there another newsletter out there pumping it? KLGDF because it’s a quality miner. ABBV as noted in NFTRH+, for its weekly chart, CBT as noted in NFTRH+ for its big drop to support (a quality company), MSFT just because I wanted more big old dinosaur tech exposure and SQM because… Lithium (we have a higher target on LIT).

ira

Trading (all short positions)…

Short DBC and GDX at profits. SPY at a loss so far.

trading

Of course, none of the above are recommendations. They are simply what I hold, along with lots of cash, in a mature bull market and are subject to change at any time.

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