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The Case For Starting To Build A (Small) Short Position

Why I just took on a new short trade in my portfolio
Tuesday, July 10, 2018, 3:01 PM

So, we're in the midst of (yet) another rally in the markets. But this one feels different...

For those sitting on large cash positions, it's increasingly looking like the long-overdue and long-awaiting end to the secular bull market may indeed arrive this year.

There is NOTHING wrong with remaining 100% in cash and simply letting your cash appreciate realtive to stocks/bonds/etc when the correction hits.

But, if you want to have some upside exposure to the correction, now is a good time to consider how much of your portfolio to allocate to that strategy. And what to put it in. And to start putting small positions in place.

Technically, it continues to look like something broke at the start of 2018. The ruler-straight run-up in the major stock indeces seen over the past decade suddenly stopped as the year began. Since then, we've seen more price volatility than in the past several years combined.

And despite the most recent price action, both the Dow and the S&P 500 remain below their all-time-highs set in early January. And while the NADAQ is now higher, there are many reasons to be concerened about its ability to rise much further -- a rationale I'll lay out shortly below.

Technical Red Flags

This latest rally is rising two important red flags.

The first is volume-related. This most recent rally has occured on exceptionally low volume, near the lowest levels seen over the past year.

This indicates that the optimism represented by today's buyers is not widespread across market participants (i.e., there's not a horde of buyers eager to keep pushing prices higher). This hints that the rally may soon run out of steam.

Low volume driving a rising market also suggests fewer buyers willing to step in to defend today's price levels if they start falling.

The second warning sign is that we're seeing Rising Wedge formations appearing in the major equity indices as we see in this chart... » Read more

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The Waiting Is The Hardest Part

Tom Petty's anthem for today's investors
Thursday, October 5, 2017, 5:21 PM

The stock market is now 70% higher than it was as the previous bubble peak immediately preceding the 2008 Great Financial Crisis.

Reflect for a moment how painful the crash from Sept 2008-March 2009 was. How much more painful will a crash from today's much dizzier heights be? » Read more

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I Just Added To My Short Position

Keeping you updated on my portfolio positioning
Wednesday, August 16, 2017, 2:01 PM

Last year, I detailed out my personal investments in the report How My Portfolio Is Positioned Right Now. It turned out to be one of our most popular articles over the past few years.

In it, I mentioned that I'll do my best to update our subscribers when I make a material change to my portfolio allocation.

Well, I just did. » Read more