Short SIgnal

[Pascal]

The CTick just crossed below its average and since the 20DMF is below the short level, a soon to be confirmed short signal has been issued.


pascal

[Riskslayer]

Hi Pascal,

Does this have an affect on the Volume Alert stock selections Mike Scott is working on? Is there a short signal over-ride such that no long positions are taken when the 20d MF is signalling short?

I assume there is no such over-ride on your Short Term Trading Stock Selections b/c you have taken short positions in the last few weeks? Can we expect to see the individual stock opportunities lead to a short bias in the portfolio in the coming days?

Any thoughts on the likely success and/or strength of this Short signal?

Much thanks,

Shawn

[Mike]

Hi Pascal,

Does this have an affect on the Volume Alert stock selections Mike Scott is working on? Is there a short signal over-ride such that no long positions are taken when the 20d MF is signalling short?

I assume there is no such over-ride on your Short Term Trading Stock Selections b/c you have taken short positions in the last few weeks? Can we expect to see the individual stock opportunities lead to a short bias in the portfolio in the coming days?

Any thoughts on the likely success and/or strength of this Short signal?

Much thanks,

Shawn

Shawn, I take market weakness as a warning but my trading horizon is longer term. For more than a year market weakness has been an opportunity for buying and perhaps weeding the garden (selling what is not working). I weeded AVGO on Thursday. Four days ago when the NASDAQ lows went above the 21-day ema the Market School market exposure model went from 55% invested to 75% invested on the long side. That is where I am.

In the QE environment I haven't tried much short side investing although I note that stocks like NUS have been working on the short side. I don't enter any position that I don't believe a 20% or more profit is available. With the FED pushing in the other direction 20% profits on the downside are hard to come by.

I didn't buy any stocks that issued volume alert triggers yesterday as each looked suspect in one way or the other. For example MPWR issued a volume alert but the chart showed a big price reversal the rest of the alerts showed minimal action. I hold ATHL, KS, EMES, CMG, CLR, and FB. All but FB and CMG were bought on volume alerts. FB and CMG were entered as a buyable gap ups.

One of these days the short side is going to gain traction and we will have a real correction. It has been 33 months since the last 10% or more correction. This has occurred only five times in history (2007, 1987, 1937, 1929, 2014). Each of the prior times led to 35%+ corrections. My guess is that the next correction will start with Pascal issuing a short signal, thus the need for paying attention. Stocks like AVGO, NXPI, ALK, IDTI, NJR and CAVM are also signaling caution. Is this the time? I don't have a clue but when the weeds get knee deep we will all know.

[Pascal]

Hi Pascal,

I assume there is no such over-ride on your Short Term Trading Stock Selections b/c you have taken short positions in the last few weeks? Can we expect to see the individual stock opportunities lead to a short bias in the portfolio in the coming days?

Any thoughts on the likely success and/or strength of this Short signal?

Shawn

Shawn, whenever there is a short 20DMF signal, I start a short position using an ETF. In the past, I used to buy SDS. These days, I prefer shorting TNA, because small caps will continue to lag as I believe that money moving out of Treasuries will land into the S&P500 linked ETFs.

The reason why a buy a short ETF position on a 20DMF signal is purely psychological. It is not to make money. I do that so that i can control my urge to short if the market goes lower. Shorting a down market during QE has alwyas been leading to losses and my best gains have been when I bought weakness during QE.

Now that I have a TNA short, I do not need to enter new short positions. I already have one. I can hence be more selective and even buy long positions against the short TNA.

Regarding the stock selection, I did not start working on it for next Monday... and I have no way to rating the strength of the short signal.

What I see is that the Jobs market is doing better, that company eanrings are great and that official inflation is below target. So, no need to raise rates for the Fed, but certainly an opportunity to end QE.


Pascal