The three indices that we follow most often, SPY, NDX, and IWM are range-bound while trading at all-time highs for the past seven days. Small caps (IWM), a measure of risk appetite, are trading above a bullish 9ema.
Summary
SPY NDX – Range-Bound
Despite the sell-off that hit the majority of stocks on Thursday, SPY, NDX, and IWM recovered by the close. The reasons for the sudden weakness are many, but the end result is the same.
U.S. indices rose shortly after the brief drop.
The trend is intact. Price action is trading in a narrow range above 335.00 (+/-) and the 9ema. A break and close below this level would change our short-term plans, necessitating a reassessment of “what’s next.”
Therefore, until the market loses the support of this zone above 335.00 (+/-) we will stay cautiously optimistic, as we outlined very thoroughly in the weekend video.
Our portfolio is balanced, so any changes in trend would require retooling longer-term positioning, currently, 40% fixed asset, 45% global/US equities, 15% cash and/or alternative assets (real estate).
IWM Small Caps
Traders concerned about market weakness should focus less on the financial media and their fear-mongering. Pay attention to small caps bullish trend instead. Price action is rising above the 9ema.
MACD is above its signal line and rising. RSI is above 50 and bullish. Volume was above average, as buyers showed up (wick) at the 9ema. You would expect a loss of the 9ema on heavy red volume if you’re concerned about the trend.
Risk Assets
If you are still concerned with “markets in turmoil” as CNBC often cites, you’d expect all of the assets in the chart below to be dropping hard. You would not expect to see them trading higher. This chart is bullish for U.S. equities unless something changes dramatically. Price does not lie!
While the thoughts herein point to a more bullish outcome, in the short-term, some investors still feel the need for “insurance.” We don’t like buying auto insurance, but it is a necessary protective measure.
With this in mind, if you’re still concerned, we have been investing a small portion of our assets (15%) noted above in the “safety trade.”
Gold, USD, bonds (AGG/TLT) and cash are insurance, just in case the markets suddenly change character. We also buy protective puts.
We’ll adjust these allocations as necessary, so stay tuned and check back often. You can also bookmark our site, The Closing Print Blog.”The rush to safety is a danger to investors”
Finally, if you’re trading in this environment, we are in day-trade mode. Few positions are swings at this point. Once the market starts trending we will update our sentiment.
Futures are moving higher and well above overnight lows.
Join us today in the trading room for our LIVESTREAM broadcast
during market hours, as we navigate the current environment. Watch, listen and trade from 9:20 AM to 4:15 PM Monday through Friday.
Happy Trading,
Vinny
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