Basically, this means we are moving from short the market to cash. The reason for the switch is technical in nature and also because we want to lock in solid 3-4% or so gains since the Model switched to short the afternoon of July 5th. We’ll take the gains and sit on the sidelines because we want our readers to appreciate solid risk adjusted gains without risking investor portfolios in the event of an unforeseen Bernankification of the U.S. stock market tape. Dr. Bernankenstein’s stock market creation lives, but it looks to me like it’s not that long for this world at current valuations. We suggest sitting this one out and enjoying a Stephen King novel instead of losing your recent earnings from the short side of the tape if and when QEXXXXXXX is announced and the market roars ahead on a falling U.S. (and all other paper currency nations) Greenback.
Tag Archive for market model
1/9/2012 Hedgephone Market Model switching to a full short position here….
Look to sell calls/buy puts or go short…. Will update
Provided the QQQ remains below the 200 day moving average the market model will be short starting Monday Morning. That said, if the market gaps up above the 200 day Monday morning the market signal will be cancelled. Right now, we are just barely below the 200 day MA on the QQQ and because of the slow stochastics and also the 200 day, the model is short equities here. One way to play this would be to short the QQQ but stay long MSFT, INTC, GOOG, ORCL as a long short play on the market.
There are plenty of cheap stocks around but you have to do your homework. Hedgephone will be much more active this month and we apologize for not being more aggressive in our trading calls (mainly we have been in cash since August).
So it appears that hedge funds are now all long the equity markets which means we will likely have a little more upside in the near term followed by another round of selling later on this year. If the S&P clears the $1278 level then we will likely head higher over the medium term as $1278 is the 200 day moving average. The market model is still holding our 33% short position which can be covered for a 1.5% loss to the total portfolio. While we are hurt by the small loss, the market model is still up nicely since our July 7 short call and we have had absolutely no correlation to the roller-coaster equity markets this summer. Once the S&P 500 hits $1274 we will again be more negative on equities and will likely issue another 100% short position or more at that time. We are now over the 100 day and 50 day MA’s so the vacuum higher should be relatively easy for the robots to perform even without any fundamental reason to move up in the near term. Stocks in general move higher over the long term but the situation in Europe needs to be watched closely.