I came into the trading week with a neutral bias and I am leaving the trading week with a neutral bias but with a little bit more hope that stocks might want to press higher in the short term. It looked like it was going to be an ugly week following Monday’s session but Tuesday and Wednesday helped repair that damage only to see the market reverse lower on Thursday before bouncing right back on Friday. If you wanted volatility, you sure got it this week. The Banks were even more suspect looking like they were on the verge of a major breakdown to a kick save back to the verge of another breakdown followed by one final kick save on Friday.
This kind of price action is what I expected during the historically/seasonally worst period of year for stock returns. I thought we might get a little more action to the downside but the market is proving to be extremely stubborn with the Nasdaq and Russell 2000 refusing to give up their 50 day moving averages. Now, on the other end, the DJIA and SPX can’t get above theirs but the fact that these indexes were on the brink of breaking down twice but were saved both times is definitely a short-term positive for the bulls. We definitely are not out of the woods yet but compared to the mood following Monday its a small win.
I did add some hedges to my very large and long portfolio of stocks on Thursday and by Friday’s close all of these signals remain true so I do have some protection just in case the market and the banks want to do a re-re-re-re-reversal of the past week’s price action. This short term volatility is why our models remain under an overall operational NEUTRAL condition. The RUT COMPQ and NDX are still under operational BUY signals but new long positions are being taken like the entire market is range bound because even though the COMPQ NDX and RUT are trending up it hasn’t felt that way in the most short-term.
The most positive technical developments on Friday without a doubt were my scans. Breadth was very positive and my scans were full of potential future long candidates along with a few new long signals. Granted, as we have seen the entire year of 2016 (and for much of the bull market since 2008), the signals were mediocre to good only in regards to their signals technically. The difference this year has been that extremely top notch fundamental quality stocks are triggering the mediocre to good signals and these growth stocks have been rewarded this year unlike they have been in the most recent years past.
This is why despite already being beyond fully invested and invested in way more individual positions than I would like to be I am going to continue to keep taking signals as they are triggered. Why? Because they are working more than 65% of the time right now and even more important when they do not work they are not costing me much before I know my hypothesis is wrong. The reward to risk ratio continues to favor taking all of these signals and until that changes I am going to continue to plug along. Especially when a high fundamentally quality stock triggers a signal near all of its key moving averages.
Have a great rest of your weekend and I wish you all the best in your personal trading during the upcoming week. Trade smart. Aloha.
TOP CURRENT HOLDINGS – PERCENT GAIN SINCE SIGNAL DATE – SIGNAL DATE
CLR long – +176% – 2/11/16
EBIO long – +105% – 5/26/16
AERI long – +104% – 8/9/16
GRAM long – +100% – 4/1/16
MIME long – +87% – 7/8/16
AOSL long – +51% – 6/14/16
SIMO long – +51% – 3/11/16
HBP long – +50% – 3/28/16
QLYS long – +44% – 5/12/16
EBIX long – +42% – 3/17/16
ABMD long – +38% – 3/29/16
CYBE long – +37% – 8/3/16
SSTK long – +37% – 7/6/16
NVRO long – +36% – 7/1/16
FN long – +35% – 4/25/16
