Teetering

Posted on Dec 12 2014 - 9:06am by Sharpe Trade

Stock market indices are poised to head lower.

That’s just weird for me to say.

It’s December 12th.  Typically, the market quiet’s down near the end of the year, and by the 15th, many market participants look to be taking time off.  I’m looking forward to taking some time to relax.  It’s an opportunity to unplug a bit from the markets, and rest up as I think about the upcoming year.

Then again, maybe not.

For the last few weeks I’ve been observing momentum falling off.  For you folks who are new to the markets, and we don’t want to leave you behind, we say that momentum is diverging when the stock market, or really any instrument, when that instrument heads higher in terms of it’s price, but tools that measure the underlying strength of the move begin to head lower.  So just think of it as … Price moves higher, while watching strength of those higher prices begin to fall off.  I know Josh Brown likes using RSI, and he’s discussed that in the past.  That’s one measure.  There are many other such tools.  Accumulation Swing Index.  Impulse, and many, many others.  Regardless of the tool used …

Momentum has been falling off.

And here we are.  When I look through the equities market?  I think we’re just teetering.  It’s weird for me to say that mid-December.  But there it is.  It’s as if we are the first people, in the first car on a Roller Coaster, and we’re just hanging over that hill.

Personally, I’m not going to actively trade it per se, but I have lightened up my book.  For the longer term holds I have, I had an ongoing hedge against taper all year that did not work out as planned, so I took that taper off and freed up some cash.  I took a 5.687 % gain by taking my profits on my Toyota (TM) hold in the valuation account after I pocketed the dividend.  So I’ve gone from 9% cash in some portfolios, to now 27.68% cash.  And actually, when you consider that many of my passive holds that can tend to rally during market downturns, I’m actually even better poised and positioned for a downturn than being 27.68% cash.  Fixed Income accounts need no adjustment.

What does the future hold?  Only God can answer that one.

But if we’re teetering, I’ve lightened up and am left holding my strongest convictions and passive holds that do well when equities are freaking out …

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