Saturday, January 25, 2014

Week in Review

Friday was an ugly day if you were long.  Luckily for us, we were on the short side with DRV and FAZ.  It worked out well, but could of been much better.  DRV was a bad pick and, really, almost any other 3x bear ETF did better.  We ended up dropping it midday for TZA.

Let's get back to what happened on Friday.  We had some follow-through that is setting the tone for the foreseeable future.  Check out the chart below.  It shows stocks above their 50MA.  For the past month it's been stuck in a neutral, which is very rare.  It's almost always moving up or down -- even if it's just slightly.

Yesterday, it finally broke -- to the downside.  This should be the start of a downtrend for the next 2 - 4 weeks.  The one worry I have, the Fed will speak up and rattle something off to boost the market up.  They've been doing that for the past year or so and I wouldn't put it past them to spew something out this week.

We'll watch closely but we firmly believe the momentum has changed gears.  With the big drops on Thursday and Friday, we may see some mean-reversion systems going into action on Monday.  This will prop the market up some, but I don't believe it will be enough to stop this train.

As always, we'll play it day-to-day.  With that said, don't get too spooked by an up day on Monday.  The trend is down and should continue down.

Keep calm, and carry on.

Thursday, January 23, 2014

Weekly Report

Not much has happened since the middle of December, which could mean a couple of things.

  1. The market is taking a breather before heading higher.
  2. The market has run out of steam and will begin its retreat after earnings season.
I'm going with #2.  I don't think there's enough gas left in the tank to take us much higher at this time.  I feel a correction is around the corner and I'm getting prepared for it.  

Stocks above their 50MA has held steady since December 23rd, while stocks above their 20MA has been falling since the beginning of the new year.  I'll be keeping a close eye on these two and if the 50MA breaks lower, get ready for some drama.  

Stocks go down much faster than they go up.  

I'm in FAZ and DRV, both bear stocks.  Anything can happen, so if I notice a change I'll quickly get long... although, that's not what I believe will occur.