My Tactical Asset Allocation portfolio is only 50% long right now, but I'm taking a speculative position in UCPIX today because of the mounting negatives. I'm going to use a pretty tight mental exit - the S&P 500 200 day moving average. Granted, if this much followed moving average is breached we're likely to see good follow through, but I'm up to the challenge.The market negatives are:
- short term NASDAQ sentiment is OB
- intermediate term sentiment is becoming excessively over optimistic
- OB MACD during a presumed bear market
- NYSE relative volume has been low for the past several weeks
- option expiration week seasonality bias towards short term losses
- we're at the beginning of "sell in May" seasonality
- anything else?
6 comments:
FED likely to raise interest rates soon...leading to strong dollar...which is turn will drive down crude oil and basic materials
I am long SMN and DUG.
Note the drop in crude oil today :)
j_shiao@yahoo.com
I use the 20 month / 400 day MA as my guide for major trends.
The SP500 just crossed the 400 day MA. Historically, this has implied a change in trend --> side-ways or up
Best of luck
CA
Question:
Commodities...price level...how much is due demand, inflation, and speculation? Don Coxe, if I understand him correctly, believes ONLY, for the most part, due to demand. Future prices are not that far ahead of spot for almost all commodities...so he says. Personally, not sure how to tease out inflation from the other two factors. Global demand is so great I just do not think that interest rates are going to go up much here; this will be a job of other country central banks. Growth is the priority here. Stagflation is a real fear. I admire when someone can weave the big picture and get it right but I'd rather play a game that favors quants more than fundamentals or macros. Technically, it's a continuation pattern. Hedge to smooth the ride but nothing more. Any shorts have to be nimble to step aside or to grab a profit.
A related issue. My newly hired TAA bought KOL/coal etf. Makes me nervous to see him act at this date.When oil drops, if ever, what will coal do...assuming global demand is still strong? Likewise, what will the alternative energies do?
jasper
My guess is oil and basic materials will begin their retreat even before the Fed gets around to raising rates, but countertrend timing can be quite difficult. I thought we might have seen the peak last month.
Beyond the likelihood of lower interest rates and a stronger dollar, it just seems oil and commodity prices have raced far beyond the current supply/demand reality.
Just want to make sure I'm clear, I believe the fundamental argument for higher energy and commodity prices over the long term is compelling. However, my gut tells me the price velocity (oil from 1/07 to present, commodities from 2002 to present)isn't supported by the magnitude of the supply/demand unbalance. The charts are reminiscent of other speculative blow-offs.
here are two broad commodity etfs that are not parabolic:
dbb/base metals; and
rja/ag crops.
I haven't looked at all the commodities but my sense is that while oil is sky high coxe mentions that only two ag items are in contango..namely corn and wheat.
Among other commodity types..some, broadly speaking have charts already blown off...nlr/nuclear....gdx/gold miners and junior miners way way down....gex/the altnernative etf...back to being pricey...as is oih/oil service but that is after so heavy duty consolidation....all very interesting...tom..you've had a good sense and the 200dma is in the building.
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