Even though I essentially moved to cash today I’m still bullish overall on the state of the markets. I opted to close out my ETF’s and take all of the profits after scaling out yesterday when I noticed we are closing in on the June highs. My thinking is that we have more downside risk (200-350 points indicated be green box below) vs upside risk (50 points).

I think the market needs a good scare and maybe that comes in the form of a down day + big gap down the following day, or maybe we have 3/4 down days where all the bears come out of the woodwork to proclaim Dow 6000. Who really knows, but I prefer the former. Even a couple boring days would be suffice to work off some of this overbought condition and allow this move to continue.

What I do know is that my system is bullish but I’m not going to fail to take the easy profits that the market has given me over the last 7 trading days. If we continue to rise more stocks will show up on my scans and I’ll get long those. If we pullback it will give me an opportunity to pick up some of the stocks I mention below as long as my overall market timing system stays bullish. Win-Win in my book.

I’m currently long INFA as it’s showed up on my scans and I bought it since we’re in bull mode. I  bailed on my NFLX trade with a 2% gain as I decided I needed more info on a particular strategy I’m working on when buying significant pullback on daily. All of the other stocks I’m watching haven’t had sufficient pullbacks to enter: ARMH ARNA CAVM INFA MNTA SWKS    Many of these stocks take off from the gate and never present a decent entry, ie, MNTA.

One other chart to consider is GLD. It’s approaching it’s 200ma and there seems to be a lot of bearish sentiment with gold right now. I don’t really care for GDX or the miners, but GLD is catching my eye and if the chart shapes up I’ll be a buyer.

What are all of you doing? Long, short, or in the frustrating position of cash?

djia

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6 Responses to “Why I Went to Cash”

  1. jeremy Says:

    Jeff,
    Hope this message finds you well.
    Few comments and questions, so I'll save you some reading and keep it to point form LOL
    Personally I've just entered roughly 1/3 shorts 2/3 cash
    Like you I am considering long gold in some form (especially if it can test 200 dma around 1145)
    I have never felt so uncomfortable taking a long position in all my time trading(even on an awesome looking chart during a good tape)
    Your market timing system seems to be bang on during these choppy 'whip saw' markets. While I don't expect you to give away your 'tells', I was wondering if you could blog sometime about your weighting for different indicators. I understand well the simpler indicators (price, volume, rsi, macd, slow stoch. bollinger bands, etc.) and have assigned them my own priorities, but I'd like to hear your thoughts on them as well as any more 'obscure' indicators you value and why.
    Sorry for the rambling, and looking fwd to your thoughts.
    J

    ps did you see my tweet on US debt and who holds it? Foreign holdings show that China and Japan have sold something like 40 B in US treasuries recently and the UK has picked up the slack, aren't they broke also?

  2. Abdul Rahim Says:

    Yesterday I took half the profit off the table leaving other half to run long. See what happen. I am placing my order for a book written by Daryl Guppy (CNBC Contributor) of guppytraders.com. The book is call Trend Trading. Yesterday, he mentioned it on CNBC about BP stock trading strategy using his analysis (based on this book)when it went down low recently. I am just curious how he trade given that time. It appeared on CNBC headline "Long or Short BP Stock? Here's What The Chart Say". by Daryl Guppy.

  3. Jack Damn Says:

    Mostly cash at this point, but I generally hold a constant short or long swing position in TBT based off a 60-minute/15-minute Kagi chart.

    ? http://kas.tumblr.com/post/833795296 (60-min Kagi chart)

    I’m waiting to see if the daily index charts are really going to begin putting in higher highs and higher lows before deploying more cash in stocks. I have noticed range expansion on New Highs through and that’s encouraging (for the bullish case).

    ~JD

  4. Jack Damn Says:

    I would say I’m in a minority using Kagi charts (minority of Western traders that is). I know of a few Forex traders who use them, but it’s a charting style that is overlooked in the West. I think mostly because:

    – it’s not common to find stock scans that will pull up new Kagi buy/sell signals and Kagi charts are not built into many charting packages.

    – there hasn’t been a lot of research done on price “patterns” within Kagi charts. Patterns such as bull/bear flags, triangles, double bottom, etc… Without even basic Western style chart patterns, I think many traders feel the simple “buy yang” and “sell yin” system that is built into Kagi charts to be too unreliable.

    – Kagi charts are like Point & Figure, Three Line Break and Renko charts in that they are price based and do not rely on standard indicators such as RSI, MACD, or volume. I think most traders feel very uncomfortable trading off price alone and without some kind of shadow oscillator or volume to help confirm trade signals.

    – Point & Figure is a price based charting style and since P&F charting is more of a Western invention, it has more research and a larger trading base behind it.

    – Kagi, much like P&F charts, was originally designed to trade off the *close of price* (instead of “high/low” data) which I think is psychologically hard for many traders (even me).

    Even though there are relatively few traders in the US using Kagi charts I don’t feel that I have an advantage with the chart style alone. I think my advantage or edge comes from relying on only price and studying efficient exit strategies … whether I’m using P&F charts or Three Line Break or Kagi, I am looking an a imprint of price in time and not the shadow of price.

    Kagi, by the way, means “key” in Japanese. Some traders still refer to them as key charts.

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