Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.


OK. The sellers have re-arrived. We know we have to be cautious. SELL IN MAY AND GO AWAY; is that a truism, a trite truth? Maybe. I am not panicking here. Let's look at the VIX. This is THE anti-stock gauge, is it not? The VIX races higher when stock selling becomes dynamic. And it's true that the VIX did break up out of the CGTS PROP1 SELLINGZONE. Break up? No. Eased up through, is a better characterization. Let's look at the chart:

Note that the PROP1 explodes up above -7 up toward +25 in a real bullish move. Any move that simply breaks -7 and lingers there is indecisive, of two minds. Note also the bottom pane. M4 21 is supposed to rise above zero in a real rally. So far, this movement has not happened. That does not mean it will not. It still could -- it could be a late-arriving energy. At this point, I would say "Stock Selling Energy" is muted. This could/can change.

However, the first wave of selling is about over. We look at the same chart-setup with UDOW, Bullish Dow ETF, with only one new indicator added, M2F ALT, a short-term momentum gauge. UDOW is oversold, in terms of this indicator. What does this mean? True, an oversold condition does not mean it is necessarily ending or read to reverse. A stock can stay oversold for a long time.

UDOW is still in the BUYZONE. Not M4 21 is above zero, which is what we expect from a bullish market move. Let's look at UDOW in the monthly chart.

Clearly, the monthly wants to go higher. The VIX Monthly Chart shows a trend in a down-channel suggesting a VIX heading lower.

I will write more about portfolio balance in the next few days. At the moment I do not have very good portfolio balance. The idea is to have a good balance between LONG and SHORT positions. This allows for the portfolio to gain even when selling hits. The KEY to this, of course, is to be Short only those stocks in a Bear Market, and Long only those stocks in a Bull Market. Every day we update our reports with an eye on just that. How many SHORTSELL signals are we getting. In a Bear Market we will get many more SHORTSELL than BUY signals. Our portfolio, today, is not balanced because we are not getting many SHORTSELL signals. Our PROP1 LOOKBACK portfolio, up 15.9% this year, heavily dependent on our PROP1 indicator, has 22 Short positions currently, and 45 Long position. Many of these Short positions are inverse ETFs -- shorting the short -- so they are, in fact, long. We have some inverse ETFS on our Long List also -- in fact, short positions. But here is a list of that portfolio:

Column1 Column2 Column3
Long ^DJT Dow Jones Transport Index
Long ^FCHI CAC French Index
Long ^GDAXI DAX German Index Daily
Long AMSC American Superconductor
Long BCRX BioCryst Pharmaceuticals
Long BRZU * Brazil Stocks Bullish ETF 3x
Long BYD Boyd Gaming
Long CLF Cliffs Natural Resources
Long CLR Continental Resources
Long DAKP Dakota Plains Holdings
Long DGAZ * Natural Gas Bearish ETF 3x
Long DSX Diana Shipping
Long ECR Eclipse Resources Corp
Long ENZN Enzon Pharmaceutical
Long FFIV F5 Networks
Long FIT Fitbit
Long FNMA Fannie Mae Daily
Long GASL * Natural Gas Stocks Bullish ETF 3x
Long GAZ Natural Gas ETF
Long HPQ Hewlett Packard Daily
Long IDI Tiger Media
Long INDL * India Stocks Bullish ETF 3x
Long IO Ion corp
Long LIFE TYR Pharma
Long LNKD Linked In
Long RH Restoration Hardware
Long RIG Transocean Ltd.
Long RTN Raytheon
Long SGG Sugar ETF
Long SNDK SanDisk Corp
Long SOXS * Semiconductor Stocks Bearish ETF 3x
Long SRPT Sarepta Therapeutics
Long SRPT Sarepta Therapeutics
Long SWN Southwestern Energy Corp
Long THLD Threshold Pharma
Long TOO Teekay Offsore Partners
Long TPUB Tribune Publishing
Long TSLA Tesla Motors Daily
Long USAC USA Compression Partners
Long UWTI * Crude Oil Bullish ETF 3x
Long UWTI * Crude Oil Bullish ETF 3x
Long WLL Whiting Petroleum
Long WLL Whiting Petroleum
Long YANG * China Stock Bearish ETF 3x
Short ^N225 Nikei Japan Index
Short AGN Allergan PLC
Short BTU Peabody Energy Corp
Short BZQ Short Brazil Shares ETF
Short CYTX Cytori Therapeutics
Short DRYS Dry Ships Daily
Short DSLV * Silver Stocks Bearish ETF 3x
Short DTO Short (Double Short) Oil
Short ERY * Energy Stocks Bearish ETF 3x
Short EVEP EV Energy Partners
Short FDS Factset Research
Short GASX * Natural Gas Stocks Bearish ETF 3x
Short GS Goldman Sachs Daily
Short HTZ Hertz
Short IBB Biotechnology ETF Daily
Short ILMN Illumina Corp
Short JDST * Junior Gold Miners Bearish ETF 3x
Short QLTI QLT Inc (Biotech)
Short REGN Regeneron
Short SPU SkyFruit Juice China
Short UGAZ * Natural Gas Bullish ETF 3x

Note how volatile the Inverse x3 ETFs are: we are short GASX, Natural Gas Stock Bearish (short the short, or long) and we are short UGAZ, Natural Gas Bearish (short the long, or short). Natural Gas really can't make up its mind what it wants to do. Also note that the Japanese NIKKEI index has gone negative, about the same day that we took on a long FXY, Japanese Yen ETF, position (in one of our other trading portfolios). We think the Yen is making a long-term trading bottom.

So, in summation, since we don't think this is the big sell-off --it MAY be, it only is not YET, so we need to keep watching -- what are we thinking about buying? Well, we love the precious metals through 2019: so gold and silver are on our watch lists. One gold stock we are watching is HMY, Harmony Gold, for ourselves and some of our readers. We want to buy AAPL, Apple Computer; we think its selloff IS a buying opportunity, only not yet. We want to shortsell VRX, Valeant Pharmaceutical, which Warren Buffet and his 90-year old partner recently trashed in the Omaha Woodstock Nation retreat -- only not yet. This shows you how "timing is everything' in the stock market. Fundamentals teach you about business; technicals teach you about investing. These knowledges ARE NOT mututally exclusive obviously. But running a business successfully and investing successfully are not the same things.

Apple and Harmony are buys, only not yet; VRX is a shortsell, only not yet.

The closeup of VRX shows the battle being waged between buyers (31.34; now 34.75) and sellers (35.75). If buyers can break up above 35.75, then they win this battle -- not the war, but the battle. If sellers turn back buyers short of 35.75, then sellers win the battle and get their way for awhile.

I have recently developed a new algorithm that seems to use Resistance and Support levels in a new trading system effectively. Both short-term and intermediate-term systems have been successful in trading. If they continue to be successful, we will unveil them in the near future.

Best trading -- and best HEALTH. Health comes first, in fact.