Weekend Update And Top Current Holdings - 10/9/2016

I went into this past week with a neutral bias and I am leaving the most recent trading week with a neutral bias. I also stated that if this market did not breakout sooner than later in this sideways consolidation that the path of least resistance would turn down. Following Friday’s action in the overall market I am seeing some momentum and time price oscillators start to rollover in the major market averages. If this tape can not get moving on the upside to start the new week the internals will only continue to deteriorate and if the market does break I believe the Brexit lows will be the next support level in play.

For now, the good news for the bulls, is that the market has not cracked yet. The bad news is that I have so many long positions trending up and other setups nearing breakouts that if the market doesn’t confirm the setups and move soon we could see some ugly reversals/rollovers. Based on my historical observations a market with this many strong stocks should be breaking out higher. Not still consolidating. This is a big mixed message and is the main reason I am back to nearly 15% invested in inverse leveraged ETFs against an 85% long portfolio.

Raising cash is never an issue in a truly weak market as new long signals fail, old long signals hit profit target levels, and nothing new triggers on the long side. This also happens in sideways trading patterns. It is very very rare that I get a sideways market that triggers both new long signals and new hedge signals that then leaves me with everything working! That is the situation right now. My hedges are working. They are not blasting higher but they are holding key support levels. At the same time, new long positions are also slightly working and/or are holding key support levels. It’s weird and unusual.

This scenario, to me, indicates that when this market does decide to move in one direction or another that the move is going to be large and quick. I do not believe I would be receive either long signals or hedge signals here if the market was ready to continue to do a lot more nothing. It is possible that this is what it will do but when there are so many mixed solid signals in a trading range it is historically a sign that a major short-term move is near. Now, if I would not be receiving any hedge signals, I would say, based on individual leading stocks, that the next move the market wants to make is higher.

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Disclosure: None.

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