Monday, July 13, 2015

Back From Vacation!

I Stayed in Cash While I was Gone


For the past 3 weeks I've been vacationing in Europe and before I left, I decided to cut myself off from the market. In my opinion, any trader in the same scenario should do the same because it forces you to liquidate your unprotected positions and your losers. 

When talking with others on the cruise, they asked how I keep tabs on my positions because I wasn't glued to my phone or computer. They were surprised when I mentioned that I was mostly in cash.  All of my positions were set up with contingent orders for targeted profit, stop loss and exits based on timing as well (if things go sideways). 

Several people mentioned that they feel uncomfortable if their money isn't in a position that is working for them.  I just smiled, it's a tough concept to explain but some times having cash is the position that works best for you.

Market Bloodbath


June was pretty brutal!  The $SPY fell by -2.5% when last year it did +1.58%. Traditionally $SPY does only +0.02% looking at historical records over the past 50 years. My market analysis on June 20th showed 12 distribution days which was pretty alarming! I could not even find a single growth stock for my watch list. 

Current Market Conditions


Currently, IBD pulse indicates "Market under Pressure" with 9 distribution days between $SPY and $NASDAQ. There are 2 additional stall days according to IBD as well.  I consider stall days to be distribution days with how the market has behaved in 2015.  All of these distribution days have piled up in less than a month so I'm not very confident on the trading front right now..

While in Europe, I noticed that CNBC and Bloomberg had a lot of international market coverage.  They covered (in depth) the markets of; Japan, China, Russia,  Australia, Great Britain, and even the individual markets within Europe! In the U.S. we simply don't get that depth and perspective which can lead to tunnel vision on our part. 

If something happens in the world, it directly impacts our markets as well. Currently Japan is down by 7%, Europe down by 5%, China down by 35% - and possibly another 5% downtrend projected in the coming weeks. We are facing another 1 million barrels of oil coming into the market from Iranian oil fields in the near future too. There is an over supply of all commodities because of the downtrending world markets.

What I'm Watching


Over the next 3 weeks we will be chewing on earnings reports from the financial and health care sector. I am avoiding both sectors for now because earnings are a variable that I can't control.  Most of the health care growth stocks with good fundamentals are showing late stage bases which indicates that institutions are maxed out here.  That's another no-no in my opinion but there are a number of other risk bearing factors that I eliminate with my funnel process too. 

I'm keeping very close tabs on the Consumer Discretionary ($XLY) sector because this sector has less exposure to Europe, China and Japan. For now I'll stay on the sidelines for any stock purchases and, instead, just utilize some option strategies to build up my portfolio.

Happy trading!






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Do not take a position unless you are prepared to sustain a TOTAL LOSS. Your loss could include the money you invested as well as commissions and transaction charges.


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