Long/Short Equity, Special Situations, Currencies
Contributor Since 2009
CGTS: THE NEW SCIENCE OF INVESTING
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 | BZH | BEAZER HOMES |
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.
MJC, CGTS