Cash Now

My little buying experiment didn’t work obviously and I sold out of everything but CPLA this morning at small losses. The positions were very small, some not even 1/3 normal size. All in all, here’s how the last 15 days have gone for me after getting out at the top and picking up some coin on the downside with shorts in STD and XRT.

Cumulative loss from the past few weeks was less than 1.3% of total equity.  For the crazy as hell market we’ve been in, I’ll take it, and I’ll walk away and say thank you.  Staying light and not involved has saved me from losing confidence and emotional capital.  I’m not worn out from the last few weeks.  I’m dissapointed that I didn’t get involved in the rally from a few weeks ago, but hey, what can you do.  I continue to pile on alpha by staying out of the way of a broken market and when I look back at the end of the quarter tomorrow afternoon, I’ll smile, and know that I did what I told my clients I would do, make money in healthy markets, and get the hell out of the way in bad ones.

We broke SPX 1040 today which has been a line in the sand for a while now.  I don’t subscribe to the camp that says once the major support level is broken that we are headed straight down crash style.  There are plenty of scenarios where we churn around this level for a while, or just continue down in a channel.  But one thing is certain, this market is broken, and the unwillingness of the bulls to hold this level shows that the liquidity train is gone and the deflationists have control of global markets.  On any significant move lower, 1040 will be huge resistance.  The more time we spend below it, the more time it will take to crack back up through it.

My intermediate term trend model flipped to short today at the close as we broke SPX 1040.  Notice below that we broke through the lower 55 day donchian channel.

Without getting into the whole model, this means that the trend is down, and longer term shorts are in play.  I will now look to short the weakest stocks into bounces.  But mostly, my allocation to equities on the long side will be kept extremely small for the time being on any bounce plays.  Notice we also got a death cross on the SPX today.

I’m paid to sit in cash while long only mutual funds lose money, which is what I’ll do for the most part.

In the spirit of idea generation though, I’ll be throwing out ideas on both the long and short side here.  And you never know when the market will get healthy again, it will do what it wants to do.

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