Friday’s bounce was definitely not shocking but I admit it was disappointing how strong it was. It left me cutting some stocks that I would still like to be long now. The biggest disappointment came in KITE which is a complete botch job as far as I am concerned at this point. However, with volatility of the volatility at all-time highs this too is not that shocking.
The great news is that we are still long with positions that continue to work. If the market does rollover here, our stops are close and will get us out with minor losses. At the same time we have some hedges on in case things get real ugly which should protect us very well if we do get some crazy crash. If we have found our lows here, our hedges will systematically come off. Currently we are 60% long, 35% cash, and 5% hedged with leveraged index derivatives.
The other potential good news is that I have two new long positions for Tuesday in two high quality stocks that show no signs of any market pullback whatsoever. That being said, this volatile market is the type of tape that likes to turn nice charts into volatile charts real fast. So all new long positions must be kept with tight stops. Those stops are listed on our new long positions page.
Getting back to the overall market, our momentum oscillators are starting to get into oversold territory. However, they have only entered these levels suggesting that there could easily be more downside pressure. Remember, there is no fear out there and the II and AAII survey shows a ton of bulls with the II survey showing that there are no bears. On top of that, the Rydex Bear Fund hit an all-time low on 1/14. The bounce was not strong enough on Friday to make me think we just had a perfect test of the Nasdaq’s 100 day moving average and that all is well. I need more proof before I can drink the kool-aid again.
While we are operating now under a SELL signal, lately SELL signals have meant market bottoms are around the corner. This time around looks a little different but we are still on a watch for a NEUTRAL or BUY signal. The first step is getting those indexes back above the 50 day moving average. After that, we will look at old resistance levels and hopefully see volume come in on this market. Right now, it is still very illiquid underneath the NBBO. So it is a very fluid situation.
For now, we remain overall in a pretty much NEUTRAL condition with our charts telling us that the path of least resistance as of this moment is choppy and down. It will probably stay more volatile than not for a while. Especially with all the gyrations in the Futures and Currencies markets. As long as they stay unstable, I am sure we will also. Have a great long weekend. I’ll see you on Tuesday. Thank you. Aloha.
TOP CURRENT HOLDINGS – RETURN SINCE SIGNAL DATE – DATE OF SIGNAL
VIPS long – +511% – 7/17/13
OVAS long – +396% – 8/8/14
AGIO long – +163% – 9/24/14
VDSI long – +59% – 8/4/14
KITE long – +56% – 12/17/14
TMF long – +36% – 11/24/14
RUBI long – +34% – 10/29/14
PAYC long – +33% – 10/30/14
TASR long – +33% – 11/10/14
CVTI long – +32% – 11/3/14
SWKS long – +32% – 10/28/14
