It was another low-volume "rally" yesterday.
Hard to call it a rally when we spike off on no volume in pre-market and then spend the rest of the day selling off. The much less-reliable Dow, on the other hand, put up a record high – all the way to 17,485 and now we're less than 1% shy of our Must Hold target – only two years after we set it and right on schedule for the end of 2014.
As we discussed in yesterday's post, "If it's a real rally, the Dow should have no trouble at all at 17,500 and should be able to get to 17,600 before there is any serious pullback and, if that doesn't happen – the rest of our lines will tell the tale." So Far, so good on the Dow as it gained 94 points yesterday (0.54%) but 17,484 is not 17,500 – hence today's headline, written long before the market opens (now 7:30).
What am I concerned about? Well, so far is been all stimulus and today Draghi holds a press conference an hour before our markets open and, unless he has more red flags to wave at the bulls – all this excitement may calm down a bit. Fed Gov Powell speaks at 1:30 and he's a bit bearish, followed by Mester this evening (7pm), who is more bearish.
Tomorrows retail sales report is likely to be bad and Non-Farm Payrolls are a wild-card but Yellen speaks at 10:15 tommorw, so she'll be able to keep any sell-off shallow into the weekend. We're not overly bearish – more like a "watch and wait" sort of thing at the moment as our Long-Term Portfolio is up 20.9% for the year and our Income Portfolio is up 18.1% for the year and the Short-Term Portfolio which hedges them is up a ridiculous 85.2% for the year.
All we are trying to do, at this point in the year, is to protect our gains into the holidays and tomorrow's NFP report is a major wild-card, as is Draghi's press conference this morning. Our long-term portfolios are 5x larger than the STP so we error on the side of bearish caution in the STP, whose main purpose is to protect our bullish portfolios.
Our favorite hedge at the moment is a spread on SQQQ (see yesterday's Live Member Chat room for details and strategy) and, for shorter-term protection, we just made an aggressive adjustment on our shorter-term DXD (ultra-short on the Dow) calls – just in case the Dow is rejected at 17,500 today.
If we do break up and over – then great – we're happy to buy more stocks from our Buy List and we'll be discussing our 2015 Top Trade Ideas and going over the Macro Picture in Las Vegas this weekend at ;30our Live Seminar (too late to sign up now), where I've been all week, taking the pulse of America – primarily from people in the auto business, who are having a huge convention this week.
8:30 Update – As expected, nothing much from Draghi and the markets intially popped and are now dropping back off as we now have no more FREE MONEY to look foward to unitl Yellen speaks tomorrow. Per our plan, we're just looking to see which of our levels stick but 17,500 is an excellent spot to short the Dow Futures (/YM) and 2,020 is good on the S&P (/ES) and 4,150 on /NQ (Nasdaq) and, of course, good old 1,170 on the Russell (/TF).
Be careful out there!
