We also saw this week a higher high printed over the short-term; the prior swing high on this decline was the 1/29 close at 1,940. Tactically this makes way for a potential bottoming sign and a trade-able setup. Structurally however this longer timeframe remains with a lower bias. As you can see we have negative sloping 20/50 Week MA's that are crossed bearishly (falling 20 below falling 50) with a larger trend of lower lows and lower highs.
Keeping this broad context of how the market is generally behaving is very important. Understand that there can be trades to be made over the short-term, but that the longer-term direction for the market remains lower. This means Long trades are more likely to fail and position sizes should be reduced to account for the lower probability of success.
Our Large-Cap Portfolio is currently 30% invested: 25% Long PM, AEP, PCG, FB, GE. 5% Short CVS and GD. 70% Cash.
This is a very defensive posture with exception of the FB and GE holdings. Last week I began to leg into Short positions in CVS and GD as price entered key resistance areas. Should we receive further confirmation of weakness going forward, I will begin to increase the position size in these names. For now they remain test positions as the market has managed to show strength.