1-27-2013 Comments

We had a rare form of stalling on the NASDAQ yesterday giving us a full distribution count of 6 days within the last 25 days. This is a lot of distribution to be carring a full portfolio. So I have lightened up and am now about 50% invested in RNF, TRGP, RYL, URI. I am also trying two shorts in BIDU and PCLN. I may be too early to be shorting so these are on a short leash.

I was able last week to sell DDD near the top as it broke an upper trend line. DDD seems to be having an energetic bounce at the 50-day today so things can change. I also sold BCEI on Friday to lock in profits.

As I write the volume is higher across both major exchanges. The NASDAQ is lower (on a day that AAPL is up) on higher volume. So this morning so far shows more distribution.

Take a look at the following chart. All that liquidity and no place to go.
[ATTACH=CONFIG]17116[/ATTACH]

Tweet from W. Scott O'Neil ‏@WScottONeil after market close today
So far stocks are working but if we get hit with a couple of clear distribution days on Naz, then I will have to cut back.

Mike,

What do you make of this? I thought we already had a series of distribution days on the Nasdaq...

[QUOTE=adam ali;24759]Tweet from W. Scott O'Neil ‏@WScottONeil after market close today
So far stocks are working but if we get hit with a couple of clear distribution days on Naz, then I will have to cut back.

Mike,

What do you make of this? I thought we already had a series of distribution days on the Nasdaq...[/QUOTE]

Adam,
We have seen a lot of distribution already. I think his comment is just that if we see more the party may be over and he will head for the exits. Whenever the distribution count rises to this level I always take some money off the table. I have already dropped to about 50% long and I am experimenting on the short side with BIDU. I sold DDD as it broke an upper trendline last week. I took profits in BCEI last week. I sold HLSS as I only had a 5% cushion and I didn't want to have a nasty surprise. I sold RKUS about flat after it just seemed to give up. I remain in RNF (about ready to take profits at the normal 25% level), TRGP, RYL, and URI.

We should see the distribution day that occured on 12/21/12 fall out of the count tomorrow and then two days later the distribution day on 12/26 falls off. The 12/26 distribution day will fall off if the index rises above 3169.57 also (+6% above the close of the distribution day).

All uptrends will come to an end and the normal way it occurs is with increasing distribution count. The FED liquidity injection is probably the wind behind the current rally and everyone is speculating about when they will stop. When I think about the deficit I don't know who is going to buy the US Treasury debt in the future other then the FED. They are in a box with the only benign way out major growth in the US economy. The alternative exit could be ugly with a FED bancruptcy. I expect to see a bumpy ride with a risk of a quick sell off on negative news.

Ok - thanks

[QUOTE=mscott;24764]The alternative exit could be ugly with a FED bancruptcy. I expect to see a bumpy ride with a risk of a quick sell off on negative news.[/QUOTE]

Hi Mike,

forgive my ignorance, but can the FED actually go bankrupt?

Thanks for all your comments, they are very much appreciated.


Roberto