Friday was a poor session overall with volume rising significantly from the session before due to quadruple witching. However, stock indexes managed to hold their Thursday lows and there was further follow through to the bounce in DB and CS which were both looking like they were about to fall off a cliff. While both seem completely irrelevant to each other it is the big picture that I am trying to see. Right now the bigger picture does not look so hot but it could have easily have been much worse on Friday if DB and CS continued to breakdown further along with the market taking out its Thursday lows.

We have seemed to have completed a 180 degree turn in this market since June 8th. However, when you take a slightly longer term picture look at individual stocks during the pullback you can see that many have continued to hold up while the market has pulled. Now, of course, many stocks have broken down and many more look like they are rolling over. This mixed action is typical of a range bound market and the fact that half of the stocks still look good in my portfolios while the other half look rough or have led to small cut losses is a common theme in a market that is going nowhere overall.

If the market was ready to breakdown, I believe that we would have seen all of my recent new long positions fail. Instead most are either rallying higher or holding key support levels. That could easily change as this market goes along but for now I remain 80% long with only 5% in hedge positions (DIA and Biotech index shorts). Since we remain under a NEUTRAL condition across the board with many new long signals triggering I will also continue to take these new signals as long as they pass all of my strict fundamental and technical requirements. When new long positions start failing and/or our models switch to SELL signals then I will halt long operations.

The market faces a lot of headwinds with a lot of negative headlines helping to weigh on this tape in the short-term. Now, while we may be a bit oversold on the short-term we are still technically overbought and only now entering the mid-range area on my intermediate term momentum oscillators on all of the major market averages that I follow. If we do find support here in the market I do not think we are going to be able to run into new high ground based on where we currently are in my oscillators. More backing and filling is what should be expected especially with the lack of overall accumulation in the overall market and at the same time lack of follow through to any selling.

The 2015 and 2016 highs and lows remain an area of battle and until either side is taken out the chances of stocks running and producing huge gains in the short term are low. As long as we are stuck in this range expect more returns to look like they do below on an intermediate term EOD trend following time frame. Eventually we will trend but we might have to wait until the seasonally favorable time of October-May before that happens. Until then it will continue to be a stock pickers market where we will have to grind out gains and cut a lot of losses quickly. Have a great rest of your weekend and I wish you all the best in your trading and investing during the upcoming week. Aloha.

TOP CURRENT HOLDINGS – PERCENT GAIN SINCE SIGNAL DATE – DATE OF SIGNAL

CLR long – +127% – 2/11/16
EBIO long – +71% – 5/26/16
GRAM long – +64% – 4/1/16
HBP long – +41% – 3/28/16
SIMO long – +31% – 3/11/16
HNNA long – +28% – 4/14/16
ABTX long – +25% – 4/13/16