Originally Posted by
shawn_molodow
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.
Mike Scott
Cloverdale, CA