Last week, I was under the impression that the selling would be matched after three consecutive weeks of declines in the Nasdaq and key tech stocks. Furthermore, European and Chinese stocks have been strong year-to-date (YTD). The following shows the DAX (German Equity Index), https://bit.ly/2QKlEXR, which was up over 15% YTD as of last Friday’s close. Clearly, I was focusing on the wrong side of the coin.
Here is VIXM, a product designed to hedge, which can provide lower volatility for most equity portfolios. The reason for its inclusion is the backwardation in the VIX and because the SP500 is trading below last week’s lows. I will revisit various times per day because we are overextended.
You can examine the term structure at http://vixcentral.com/. Nobody know with certainty if we will end the week positive of negative, however what I know is that sellers are in control.
Here are the key indices I periodically review as of Friday’s close. Today is expected to register lower.
Health Care and Consumer Staples are positive year-to-date (YTD), while Financials, Energy, and Utilities are likely to turn negative if buyers or bulls do not take control this week. Key trend-following systems with negative YTD performance are likely to add fuel to the fire, especially since the stock market’s recent leaders are the ones experiencing the majority of the selling orders.
For those seeking a push higher or a buying opportunity, I am waiting for a positive close followed by a positive open. I might miss out on up to 5% of the SPX’s movement, but I’ve never been adept at catching falling knives without a clear stop-loss on the chart.
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