Markets have gone from 1044.50 to 1153.41in S&P 500..a gain of 108.91 points or +10.43% in a short span of five weeks...this is the steepest gain since March lows.......
Investors bullish reading shot up to 45% from 35% last week.....
Triple witching is this Friday......
RSI reading in all indices are @ or above previous 4 month highs...which has resulted in "major downtrend" each time from those levels.......
Nasdaq RSI in 4 month 14 day table shows a reading of 74.84.....which is the HIGHEST level in 4 months.....each time when Nasdaq RSI was this high we went down in a hurry to test support...RSI in each instance went to either 42 area or as low as 32 area......which was the low point @ 1044.50........
For traders....it is an ongoing evaluation of risk/reward ratio.....currently it IS a very high risk scenario.....so make sure you are ready to ride it down to support wherever it may exist.....
Most of the catalysts for an uptrend is already priced in......thus a pullback is imminent......
Next catalyst for the market will come in first week of April...when Jobs report should be above expectations......till then there is three weeks of doldrums which may not be pleasant for uber-optimistic crowd.....
WHY..am I NOT optimistic @ this stage ???
Because...market is a discounting mechanism & currently it has a lag time based on SEASONALITY & CATALYST.....
Q2 generally is a slow period for Techs & markets in general........so a CAUTIONARY approach is PRUDENT.....
After Q2 ER is out..guidance generally will be better as Tech & Retails are preparing for busy Fall orders..which is back to school time....it will be a back-end loaded Q for most......
Markets will remain in a trading range as US markets are known for......
Selling @ Highest RSI & Buying near low RSI is a "no brainer"......
I am expecting next 3 weeks to be PAINFUL as market digest all the euphoria which is priced IN......
I am closely looking @ adding more BEARISH bets on Monday.....
Also....I am looking @ exiting some long position or doing covered write IF they are not profitable......
Covered write will Lower my cost base.......
It will be wise to LOCK what market is giving you & change STRATEGY @ the same time......
Some easy bearish bets can be done through QID,DXD,SKF...they are all Double short which is meant to catch short term declines....NOT a buy or Hold ideas.....
Puts in overbought stocks is another strategy which can be implemented......
Writing covered call is a safe strategy to recoup some of lost equity in any decline......
I am sure you all have different take on markets & trading strategy.....I have just listed what I am looking @ near term......
You have to feel comfortable in your OWN interpretations of all the analysis which you read or heard.....In the end it is your hard earned $ which is @ stake......
Here is my $ allocation/sectors/RSI
APWR 35.16% AE/Wind Turbine 51.61
IAG 25.56% Gold Mining 47.25
SLW 22.17% Silver Reseller 52.72
VXX 17.11% Long VIX (Bearish Bet) 27.27
So..currently I have long position of 82.89% & Short 17.11%...this ratio will change further on Monday towards defensive bets.......
Good luck with your portfolio...remember none of us is capable of predicting the direction of markets BUT it is good to do a serious review near major TOPS & BOTTOMS........
BLOG does NOT give buy or sell.
Saleem
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