Weekend Update And Top Current Holdings - 10/23/2016

Well it isn’t over until it is officially over but we have officially exited the historically seasonally worst period for returns in the stock market.  However, until that happens, we are still very much in limbo land with a just-as-good probability that this consolidation resolves itself lower rather than higher. The setups favor the bulls but the market will always have the final say and could easily render all the setups false.

It wasn’t an exciting week for sure but that was actually a good thing if you are still heavily long as there was a lot of talk of a 1987-style possible crash following a similar setup to the market back then. What many of the pundits creating those charts failed to mention was that leading stocks during that period already had signs of topping out BEFORE the sell off started and many stocks were breaking down on serious volume while the sell off was happening before the day of that huge crash. This time around, stocks were not showing signs of topping before and/or during this most recent market hiccup.

In fact, long signals not only continued to trigger during the past nearly two months following our sell off on September 9th but my current holdings leading up to that sell off continue, for the most part, to hold important key support levels and are still building a series of higher highs and higher lows. That being said, we have seen a lot of rotating out of laggards into new leaders with half of those new leaders failing right away. We are also still receiving hedge signals. However, the point I am trying to make is that while everyone was worried about a crash leading stocks continued to act healthy. The exact opposite of 1987.

So now we are entering one of the seasonally most bullish times of the year. I am about 75% invested in long positions while having 15% of my portfolios in leveraged inverse ETF hedges. If the market does breakout higher, those long positions are going to reap the benefits of a disciplined trading strategy while my hedges will hit their trailing profit taking/loss cutting stops. The money raised from those hedges along with the near 10% cash level I have currently will be deployed in the new leaders that breakout higher along with the market when/if the market decides to confirm seasonality.

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Disclosure: None.

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