SP500 (daily)
I haven't been focusing on the broad averages for much of this year as they have been mostly irrelevant to my longer-term winning uptrends. I manage risk in individual leading stocks and as of Wednesday afternoon everything was following the same playbook.
By Friday's close however massive technical damage was done to our holdings and we have been nearly cleaned out. This week we saw exits for BMY, GS, WFC, AIG, GILD, and HON. We are only left with SBUX, FB, HD, and UNH.
Exiting BMY
Exiting GS
Exiting WFC
Exiting AIG
Exiting GILD
Exiting HON
Exiting AIG
Exiting GILD
Exiting HON
We cannot worry that we may be selling at the bottom. All pullbacks and bear markets start the same way. It's always some scary news and price comes into support levels. How they respond at those support levels is what determines whether a pullback is simply a buy able dip or a major violation damaging the trends in place.
The SP500 had significant support levels at 2080, 2040, and 1980. The market sliced through all three levels this week meeting no resistance at all
Could the market turn and rally right back from here? Sure it could. That's the worst case scenario right now; If the market rallies right back to highs we will have sold at the lows and looked foolish. But we have our capital intact and ready to deploy into the next round of leading stocks should we receive new entry signals.
We manage risk, that's the best we can do. When stops are triggered we don't qualify them in terms of causation. We don't say "oh that was just because of China fears", or "traders are overreacting about the Fed". We simply honor the signal and exit the position.
Discipline and sticking to your process is what works over the long-term. Its not critical that we adjust our strategy to maximize our profits on this particular round of trades. These have very little impact on our long-term returns. They are the just the last 10 trades out of the next 10,000 that we will make.
When the market tells you something its very important to listen and respond. Up until last week all of our positions were in the green and were still trending nicely. After this week however most of that changed and lows were violated. We invest with an open mind, and stocks are only good when they are going up. The market is suggesting that Sellers have arrived and are now in control of the market.
Until this changes we will manage our remaining holdings and sit with large cash balances. Our allocations are currently 70% Cash and 30% Long Equities. YTD our Lg-Cap portfolio is now +1% while the SP500 is -4.2%.
Remaining Longs
SBUX
UNH
FB
HD
Our survivors took a real hit this week as well yet are still holding trend for now. Should the market continue to see downside follow-through we will likely lose these as well. If however stocks can rally back as we have seen so many times before, these should be able to establish as the new leading group for another leg higher.
Thanks for reading
-ZT
Could the market turn and rally right back from here? Sure it could. That's the worst case scenario right now; If the market rallies right back to highs we will have sold at the lows and looked foolish. But we have our capital intact and ready to deploy into the next round of leading stocks should we receive new entry signals.
We manage risk, that's the best we can do. When stops are triggered we don't qualify them in terms of causation. We don't say "oh that was just because of China fears", or "traders are overreacting about the Fed". We simply honor the signal and exit the position.
Discipline and sticking to your process is what works over the long-term. Its not critical that we adjust our strategy to maximize our profits on this particular round of trades. These have very little impact on our long-term returns. They are the just the last 10 trades out of the next 10,000 that we will make.
When the market tells you something its very important to listen and respond. Up until last week all of our positions were in the green and were still trending nicely. After this week however most of that changed and lows were violated. We invest with an open mind, and stocks are only good when they are going up. The market is suggesting that Sellers have arrived and are now in control of the market.
Until this changes we will manage our remaining holdings and sit with large cash balances. Our allocations are currently 70% Cash and 30% Long Equities. YTD our Lg-Cap portfolio is now +1% while the SP500 is -4.2%.
Remaining Longs
SBUX
UNH
FB
HD
Our survivors took a real hit this week as well yet are still holding trend for now. Should the market continue to see downside follow-through we will likely lose these as well. If however stocks can rally back as we have seen so many times before, these should be able to establish as the new leading group for another leg higher.
Thanks for reading
-ZT
Thanks for the update!
ReplyDelete