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Jun 28

What We’re Watching

We’ll do our usual weekly reviews of our futures and equity portfolios over the weekend, but as the month and quarter comes to an end and everyone starts navel-gazing, here’s a quick update on some of the charts we’ve been highlighting in recent weeks, here’s how it looks from our noise-free big trends point of view.

EQUITIES

We got short S&P and NASDAQ after the big support break, we’ve had a bounce into first resistance in terms of price and MA’s, the intermediate trend remains down unless we can clear the high 1620’s.

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Here’s how it looks on our Correction Roadmap:

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Predicting has never paid us well but it’s hard to believe this correction, if you can call it that so far, is over. We’ll follow whatever price dictates, and there are still plenty of stocks in strong uptrends with new ones setting up, but we suspect a few more weeks of sideways to down choppy action is the most likely course going forward.

BONDS

That is one massive break in $TLT last week, and so far all we’ve seen is a weak test of the underside.

AlphaCapture

The big guns have been out this week too, giving their views on where we stand. A quick word on that. Every time you see a fund manager in the press making headlines, think what their motivations are. When CNBC reports Bill Gross and Jeff Gundlach are saying the worst is over in bonds, it’s an exercise in damage control.

Obviously they are phenomenally successful investors and we take nothing away from that, but no matter what they say the real takeaway is “Bond manager bullish on bonds.”  As actionable advice it’s about as useless and unsurprising as Mothers Tsarnaev and Hernandez saying their baby boy will be found innocent.

What else did you expect them to say?

OIL

Oil continues to cut up all but the most sanguine and patient investor, it missed its old range so much it just had to dive right back in there. We’re close to getting another long signal on this (via the futures, we’re showing $USO here) and to be fair, with another higher low in place it could still make for a good risk/reward trade.

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GOLD

We’ve been short since 4/5 at $1,554, it’s been a nice trade but not without the need for great discipline to withstand a $100 rally without invalidating. The prospect for a similar move now is clearly elevated, and it has to be said, sentiment is a lot more negative and consensus here than it was on the big two-day break in April.

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Remember, when we talked about The Coming Capitulation In Gold we were highlighting the prospect of exactly that, ie ‘capitulation,’ the real takeaway of which is not necessarily the down move it produces, but the potential for a long-term base that follows.

Our plan is the same as always, when the downtrend is invalidated we’ll cover. If it resumes, we’ll short again. If it becomes an uptrend, we’ll get long. It’s simple stuff. It just requires rules, and the discipline to follow them.

 

 

2 comments

  1. Dave

    Jon, I’m a new viewer and sympatico with TA and MoMO investing.
    Question: I have a “rule” not to buy counter to the spx tren(13 34ma xo). Thus only go long when market is up; only short when market is down. Do you keep records of how your countertrend buys perform? How do you develop cajones to go long in a correction? Do you think I should scrap my “rule”.

    1. Jon Boorman

      I can’t answer whether or not you should scrap your rule, only you can answer that, because only you will know why you put it in place, possibly you have some evidence that supports that, or it’s a way for you to deal with the emotions that would otherwise come to the surface. As much as possible I try to look at every chart and position on its own merits. This means I will still find stocks in long-term uptrends regardless of what the market is doing. What doesn’t make sense to me is using a market view to then stop looking for opportunities, I find the more sensible approach is to acknowledge those opportunities could still exist, and to find a way to better manage the risk of holding them in a downtrending market. Many trend followers will still take positions for that reason, but hedge them against the $SPY when the market’s in a downtrend. You can do this easily at a portfolio level. I find the market acts as its own filter, you can see on our performance tab when we’ve had a flurry of exits or entries, or even long periods where there were no new entries. You’ll find you’ll get exits after the market has turned, but you’ll get new entries before the market confirms the correction is over.

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