This morning I saw a color other than green in the futures and global markets. US and global markets are down and the knee jerk reason seems to be a China growth slowdown along with a side of the Spain crisis and US congressional shutdown. And then there is this standard fare for October (MarketWatch). The media are probably completely neutralizing the potential for market crash just as it did the ‘1929 crash’ analog that made the rounds a few years ago.
If the market goes on to weaken, these reasons (and more, like perhaps the Rocket Boy?) will be used as excuses. But we have had Q4 2017 as the time for a top of some kind and the reasons for it had nothing to do with any of the above. If the markets weaken (still a big if), it simply will have been time.
How to handle this morning’s strange sightings of red in pre-market? Well for one thing, gold and silver are positive and HUI held its 195-200 key support area, so there is that as a potential counter balance. As noted, I have held the items I’d prefer to hold as long as that HUI support held up.
For another thing, I’ve held on to the short on the market via the leveraged SPXS. Annoying as it has been so far to hold, I am trying to back my own Q4 top thesis with something.
The US dollar is down a bit in pre-market and I am going to watch it here because while I think it has a bigger bounce ahead of it, it has relieved its oversold conditions as it has carved out what still looks like a bottoming pattern. But I’m keeping an open mind.
And now for the elephant in the room. Just a couple days ago I highlighted the Industrial metals and also initiated positions in a few miners. The idea was to take modest positions and then add to them on pullback. So my own bullish call about the I.M. may have ironically been used as a contrary indicator by my other call, for a Q4 market top. The market is going to find a way to clown you one way or another sometimes. I just accept it.
What I am going to do is hold the miners but not yet add to them unless I see their daily technicals hold. Conversely, I’ll get rid of them for losses if the technicals break down. Using the most frequently discussed item, RIO, as an example, a loss of the blue SMA 50 puts me on guard and a daily close at a lower low to the September low breaks it.
As for other items held, I’ll probably trim down if the market actually weakens and loses its most recent ‘robo-trend’, and start to pivot into a neutral and possibly even bear stance due to the Q4 correction view. Where I am involved most heavily is with Biotech (IBB, AMGN & CELG) and Medical Devices (MDT, MZOR). The Bios are noted to appreciate lower interest rates and this morning at least, yields are down. Things don’t happen daily on a logical 1-for-1 basis, but I don’t want to sell this sector yet, at least until given clear reason to. We’ll review in another update or NFTRH 470.
But I am not overall heavily involved in the market and cash will continue to be the most valued asset other than perhaps slow and selective buying in the gold sector (which ultimately needs a correction in stock markets in order to be a bullish destination) to increase current positions (AAU, BTG, EXN.to, MOZ.to, PVG & SBB.to) and add new ones. Profits were taken on NGD, AEM and a greatly a reduced profit on the disappointing SSRM. SAND was a break even. Losses were taken on AXU, SVM and PG.to as part of the cash raising noted a few days ago. Any and all of these remain on watch along with KL, KLDX, NEM, etc.
I am not inclined to let one red day in the market bother me to the point where I’d sell the few items that I am really trying to be an investor (BB, GNUS, DXJ for example). This morning’s red could be erased in a flash by the manic market that has only known one direction for too long now. But then, there is the Q4 top view and since I created it, I am sure going to respect it if it starts creeping to the forefront. But this could after all, be a buying opportunity in the global growth story since that is the trend that has been in place.
At the very least, maybe there will be something to talk about this weekend other than robotic up trends in stocks. So, pending any other updates during the week I’ll see you then.
