Markets are currently being misshapen by the re-balancing needs of the quarter-end. However, the algos i rely upon do not know that, so march forward like good soldiers.
I closed my hedge positions yesterday, ending the 10y and gold trades, both at losses. Remember, my hedges are discretionary, my core positions are algorithmic. Also, the core positions are programmed to trade the medium/long term, not the short-term. I currently cannot compete with the intelligence of the short-term bots that the HFT firms are running. They are getting scarily good. One can avoid this fight by only trading longer term. My core position has been long /NQ and remains long /NQ, even though I have given back a third of total position profits. This is typical! It was never our money, not until we sell.
This is the summer scare in my opinion. I’m expecting a rally into the end of the year. However, we haven’t seen a puke-day. So, probably more to go.
Notice of the total option ratio is close to a sell on NDX (when the green line crosses firmly below the red). Not there yet.
Also, note the early recession warning continues to climb. I believe we will have a recession ’18 or ’19
Look at gold versus real rates (tips). Gold seems oversold here. And i’ll get long again soon. I’m just waiting for my algo to say buy again. But even then, remember, it is as a hedge, not a core position. If North Korea goes bang owning gold will look like genius.
If you are looking to put some slow money to work, healthcare and technology look good, one has momentum the other is oversold. Vanguard has a great healthcare fund. I’ll be adding some tomorrow.
Finally, the current ten positions of the Momentum Model
Happy July 4th!