-1% First quarter 2014 USA GDP
Yet, the market keeps making new highs.
Supports the old saying that the market can remain irrational longer than you can remain solvent.
If you are short the market, or all in cash, my condolences. Now correct your mistake and take your medicine.
If you wish you had more money deployed long, stop wishing and put on some risk in good companies with good looking charts.
Rick Santelli presents the numbers: http://video.cnbc.com/gallery/?video=3000279725
Look at the IWM on the daily and weekly chart views for some clarity.
The SPY trickles up despite our demands for it to correct.
What is an investor to do?
I present a case for managing your risk in some charts that look good to me, as long as you have an exit strategy and diversification of holdings that include at least significant cash.
Never short the market if you cannot place and take a stop.
Take a look, and please, leave comments if you see flaws in my analysis.
I would expect an attempted rally early next week, since the market did manage to keep the SPY above the 50DMA last week.
The IWM is continuing to slide, but a bounce is due.
I closed my short side exposure by exiting the TZA, and will likely use an early week rally to trim longs, UNLESS, the market puts in a seriously good rally attempt with good volume, in which case I will add to longs.
It seems absurd to get comfortable with the bull market just continuing on, despite the recent revelation that the economy is essentially back in recession (.1% GDP?! YIKES!), and the bull market is already very old. But guess what! The only way to make money is to stay on the right side of the trade. The market will not roll over because I think it should.
I will participate in the dominant trend, and profit.
Took profits on the TZA at the top of the channel. Will re-enter on a pullback if conditions warrant.
The bulls took control today and pushed the market to a new all time SPY close. Volume was not spectacular which does make the otherwise bullish move suspect.
My TZA position took a serious beating but is still alive, stops still in place, but not yet hit. If I do get stopped out, that will be fine, and I will pivot in the direction of adding to long positions that are in the portfolio. If the market reverses lower, rejecting today’s rally attempt, I will trim the longs and add to the TZA.
I intend to profit regardless of market direction.
This is going to be a week to remember.
The case for the market setting up for more downside is far more compelling IMHO, but I would stay neutral until the market makes the move first.
See if you agree with my analysis below:
The SPY is hovering at new high levels.
If it does not break into new blue sky territory, this is a dangerous consolidation period. I think the IWM trend shift is telling.
I started a position in the TZA (small cap bear 3x) and will exit if it breaks below 15.79 as per the chart below.
Watch the video for my overall analysis.