Weekly Signal: Sell
Sneak Peek: The Daily Decision Service
On occasion, TSP allows all visitors to "sneak a peek" inside one of our portfolios. This is not a promotional piece on the service, but rather a live look into the service's latest report to subscribers. Below is this week's report on the weekly timing signal reading.
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TSP Daily Decision Service Members:
The market’s corrective phase continued last week as the major indices finished lower for a fourth consecutive week. However, thanks to a furious round of short-covering late in the day on Friday, the damage was limited to just -0.72% for the S&P 500, -0.55% on the DJIA, and -0.29 over on the NASDAQ.
The week began on a hopeful note as traders realized that the administration’s plan to punish and/or break up the big banks was unlikely to ever see the light of day from a legislative standpoint. With stocks oversold and appearing to have held at an important technical level, it wasn’t surprising to see a bounce higher early in the week.
However, the combination of overhead resistance, a failed auction in Portugal, and rumors of trouble in hedgefundland brought back the sellers in a big way. With worry about sovereign debt defaults in Europe running rampant, traders flocked to the safety of the dollar, which, in turn, wreaked havoc with the carry trade; forcing traders to unwind positions by buying dollars to cover shorts and selling stocks, commodities, and emerging markets.
The question of the day is if the decline has run its course. If you didn’t know that Friday’s big rally at the end of the day was program related, you could probably argue that a decline of -8.5% was enough of a pullback to entice the bargain hunters to return to the game. But, with the Dow popping up more than 100 points in 10 minutes with an hour to go in the day and then another 50 points in the final 10 minutes, it is clear that the move was program driven. As such, we’re of the mind that the current dance to the downside may not have ended on Friday afternoon.
Turning to our models, for the first time in nearly 11 months, our weekly model has moved into the sell zone. As a reminder, our weekly model is designed to "call" the overall direction of the market for the coming week. The weekly model has given signals to go neutral six times since the current “mini bull” began on March 10th, but you have to go all the way back to March 16th to find the last sell signal (which was quickly reversed).
Whether or not this particular signal turns out to be accurate or not is anybody’s guess. However, unless the bulls reassert themselves enthusiastically in the near future, we’re going to suggest that the character of the market has changed – and our first sell signal since early March would be entered as exhibit A.
With the market having already corrected -7.5% on a closing basis since its January 19th cycle high, we’re a little hesitant to jump on the short side immediately. Thus, we are going to watch the action closely on Monday to determine whether or not it is prudent to move into a short position in the Main and Hybrid models.
Please note that this is NOT a Trade Alert and we are not taking action at this time. As always, we will send a specific Trade Alert when we decide to make a move.
Enjoy the remainder of your weekend,
Dave Moenning
Founder TopStockPortfolios.com
Below is the Weekly Timing Signal reading for the week:
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The Bottom Line (Our Current Positions):
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Main Model: 100% Cash (Money Market)
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Agressive Model: 100% ProShares UltraShort S&P (SDS)
- Hybrid Model: 100% Cash (Money Market)
Daily Decision Performance Results
Below are the performance results of our model portfolios:
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