Our core market health indicators moved slightly higher this week even though the market fell. This signals that the current correction is most likely healthy, rather than the start of a long term down trend. The only fly in the ointment is our market risk indicator. It signaled intra-day a couple of times this week, but it doesn’t appear that it will close the week on a warning signal. Bottom line we still have a battle brewing between rising perception of risk (bearish) against healthy underlying conditions in the market. This battle is occurring while the market is right next to an important support/resistance level. At the time of this writing (3:30 Eastern) the S&P 500 Index (SPX) is rallying into the close and is at about 1597. We’d like to see it close the day above 1600 as that is one of our major support levels generated from the Twitter stream. Our portfolios will remain with the same allocations since we didn’t get a signal from market risk (or
As the market corrects the Twitter Top 10 Portfolio is correcting at a faster rate. The under performance is almost across the board with only Cisco Systems (CSCO) holding up. The portfolio is down 8.3% from the first Friday of June, but still up 16.3% from the first Friday of the year. This is in contrast to the S&P 500 index being up 8.4% from the same date. One note to the portfolio is that we warned against Baidu (BIDU) and Celsion (CLSN) when we created the list. BIDU is down 9.24% which is near the bottom in performance so far this month and CLSN is down a full 25% which is a disaster. This is once again a reminder that you should never blindly buy any list of stocks. Below is a performance chart and details for the current holdings. Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss 6/7/2013 $BAC 940 13.38 12577.20 12.7 11938.00 -5.08% $GS 75 166.01 12450.75 154.29
Just a quick note today. Our market risk indicator is currently signaling. We require a weekly close for an official signal so a strong rally tomorrow could negate it. If it is still signaling tomorrow before the close of the market we’ll be changing our portfolio allocations in the portfolios that use our risk indicator. Our core long cash portfolio will stay 80% long and 20% cash. It follows market internals and our core market health indicators. As a result, it doesn’t react to increasing odds of market risk. Our long cash portfolio that recognizes market risk will go 100% to cash. Here’s a link with some information about both of our long / cash portfolios. Our hedged portfolio (long/short) will be aggressively hedged using put options or a volatility ETF (like XVZ). Please remember we won’t make any changes unless we’ve still got a signal at the close tomorrow. We’ll post an update here and on Twitter @DownsideHedge before the market closes if we make any changes to the
Below are the intensity scores for the most active stocks on the Twitter stream for the week and month ending 6/18/13. Apple (AAPL) continues to dominate, but Google (GOOG) and Tesla Motors (TSLA) are starting to see a lot of tweets.
Below are charts with the bearish intensity for the most bearish stocks on Twitter for the week and month ended 6/18/13. A wide range of sectors, but emerging markets and gold are near the top ideas people don’t like.
Below are charts with intensity scores for the most bullish stocks on Twitter for the week and month ending 6/18/13. Notice how many technology stocks are in the weekly list.
Since mid April we’ve seen a bit of bottom fishing among the 50 most active stocks on Twitter. We currently have four stocks with counter trend bounce signals in place. Each of those stocks have rallied to moving averages (50 and 200 day) and also down sloping trend lines. This is a point where people who are bearish on the stocks should be selling them short. This creates a battle between the longer term investors who are picking up the stocks as they fall and bears who sell every bounce off the underside of moving averages. By watching these battles we can learn about the underlying strength of the general market. If the current rally is near a turning point we would expect to see more short selling in the market. In addition, the stocks that are being sold should fall and continue their long term down trends. For a general view we like to compare a short of the S&P 500 Index (SH) against an actively managed bear fund
Over the past week our core market health indicators fell slightly, but we made no changes to our core portfolios. The details are in this post. We’re seeing a battle between event risk and market internals. Overall our measures of market health and internal structure are constructive, while our measures of risk are signalling skittishness by investors. The S&P 500 Index (SPX) held up fairly well last week in the face of several market scares. It seemed like every day brought some new rumor that drove the market up and down. But when the dust settled SPX only gave up a little over one percentage point. Meanwhile measures of intermediate term breadth like the percent of stocks above their 200 day moving average and the bullish percent index still have very healthy readings. Looking at market internals this appears to be a garden variety consolidation. We’re not seeing any real damage under the covers as price pulls back. SPX has held a critical support level near 1600 and bounced twice
Over the past week our core market health indicators slipped a bit. The most notable weakness came from market risk. On Wednesday and early Thursday our market risk indicator got fairly close to a signal, then pulled back as the market rallied. As noted earlier in the week, all but one of its components is now negative and any acceleration in the market to the downside (probably through 1600 or 1575 on a weekly basis) will most likely trigger a signal. Our measures of the economy are staying flat, but trying to recover. Our measures of quality dipped slightly, measures of trend are showing weakness, and measures of strength are holding up. Overall, the market looks healthy to us, but the skittishness showing up in market risk puts us in a position where we’re watching closely. We still suspect that if we raise cash or add hedges it will be a result of our market risk indicator rather than market internals. We made no changes to our core portfolios over
Just as we suspected when we saw the picks for the portfolio this month, a thinking person would have skipped Celsion Corp (CLSN). It is down 21.43% in just a week. This is a great example of one of the limitations of mechanical investing and the reason we try to warn about stocks we’d skip for our own portfolio. It is a good reminder for you to always think for yourself…and never follow any investment strategy blindly. Overall the portfolio is down 4.74% for the month, but it is still up 20.8% from the first Friday of the year. Below is a performance chart and details for the current holdings. Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss 6/7/2013 $BAC 940 13.38 12577.20 13.08 12295.20 -2.24% $GS 75 166.01 12450.75 164 12300.00 -1.21% $F 903 15.73 14204.19 15.45 13951.35 -1.78% $CSCO 513 24.49 12563.37 24.18 12404.34 -1.27% $C 243 51.6 12538.80 48.49 11783.07 -6.03% $KORS 200 62.69 12538.00 60.81 12162.00 -3.00% $CLSN