THE WALKING DEAD
I can see myself going through a dead period of sorts over the next several weeks. There are a convergence of factors at play that have led to a drought in terms of potential activity. Among them:
- The markets are, I believe, in the process of putting together a top of some magnitude. My short-term trend indicator has already flipped to SELL. My intermediate and long-term indicators are beginning to look like they would like to put on the gas face as well.
- The potential for new long positions has dried up terribly. I run through my scans of the market daily, after the close, without fail. There are fundamental opportunities, as there always will be. What has changed rather dramatically is the price structure of the opportunities. The current price structures among not only small-cap, but mid to large cap stocks, as well, has become encumbered by risk. Low risk price patterns are simply nonexistent in fundamentally viable companies. This prohibits me from taking on new positions in the portfolio, as I put price structure first.
- The symmetrical tendencies of the market have shifted over the past few weeks. Put in simplified terms or rather to paint a picture that makes this concept easier to understand: Every bull and bear market has a set of laws by which price movement abides. A proper, healthy and vibrant bull market will remain symmetrical, in line with trajectory points of all time frames, that alert the astute investor that the trend is healthy in nature. It is when that trend towards symmetry breaks and then reverses that an investor should take note. Recently, the Dow and the Nasdaq have been viewing their respective generational trajectory points as a point of great stress, instead of accelerating up through these points. The symmetry of the market, with respect to these points of interest, has changed. This is important.
With all of that said, I am happy with my current positioning that has the portfolios sitting net neutral in terms of equity exposure via the TZA hedge I put on last week. I am sitting on a growing cash position, as I am almost done with liquidating portions of each position, with the exception of WMIH. I don't see exposure moving too far away from neutral for the foreseeable future. I am simply more interested in stabilizing things here, rather than going for a home run of any sort.
That is where I stand on this night.
