we are sticking on the sidelines in our model… That said, more aggressive traders may want to take out a small short position on the QQQ via put options as a directional bet or as a hedge against existing long positions.
Hedgephone has been MIA this summer, as I am deep in the forest working on real estate holdings (think log cabin and other improvements). I will even post a pic when I get things finished.
As an aside, the Presidential election is coming up and of course there should be some serious and severe fireworks ahead. Another reason to consider owning some volatility. One way to play it would be to buy QQQ puts while shorting the VIX exchange traded ETF (I think its TVIX or whatever)…. Triple levered funds always blow up when the stuff hits said fan.
All in all, we have a fairly overbought RSI at around 58 or so, a slow stochastic in the overbought range, and a FED that appears to be sitting on its hands (probably a good thing considering the market is much higher than many future free cash flows analysts are valuing the S&P when those free cash flows are discounted to a present day value.
We think $1362 for the S&P is a little rich, but this is a political animal controlled by bankers, the FED, the Treasury, and by partisan politics. (Politics as usual!)…
So whatever you do, don’t get too emotional around election season. Things may end up going to the extreme either one way or another. Interesting to see the Facebook (FB) implosion… Could our prediction about Facebook’s stock price drop be correct and the broader market is the next proverbial shoe to drop? I sure hope not, but hope is a pretty crummy investment strategy!