The trend momentum remains a strong 70% uptrend.
We remain bullish, while hedged with a small amount of TZA and TVIX, with the odds of a royal melt-up landing similar to a bull ending peak and reversal.
Which puts the analysis in the chart below the most likely outcome in the short and intermediate term.
The usual trading pattern when in high risk blow off bull years is shown below, overlaid over some past blow off bull years, with the white lines to the left of the chart the NASDAQ for 2017.
As the chart shows, we have moved into the peaking area of the starting rally where the first of an expected three corrections are slated to land right here.
If the rally keeps on going, then we are likely in the middle rally position, though for now a corrective seesaw landing right here is the most likely outcome.
From a trading perspective, the trend remains up – thus holding longs remains the optimal trade – while the VIX Hedge Cycle signals danger that requires hedging those longs with a small amount of TZA and TVIX.
The 401K portfolio remains fully invested in a stock index mutual fund.
On the performance front, no change to the big picture performance chart of the Index and 401K since the last closed trade, though both the 401K and Index lines are hitting new all-time highs once updated as current trades close.
The second performance chart below has been adjusted to represent performance through this week for 2017.
The black line in the first chart shows buy and holding the NASDAQ index since 1973.
The purple line shows 401K performance, which trades 100% on new buys, then reduces to 50% on trend trading indicator extremes, cash on sell signals.
The solid green line shows the AK bull/bear cycle adjusted performance. That bull/bear cycle indicator divides the stock market into four phases based on risk – low risk (new bull markets,) moderate risk (sideways churn that ends well,) high risk (blow off bull destined to end badly,) extreme risk (major bear market underway.)
The current stance is a high risk blow off bull (orange arrow upper portion of chart below) that is destined to end with a major bear market, though the gains seen between now and then could be spectacular.
Have a great weekend!
Current positioning for the Index/Hedge/VIX portfolio remain 94% QLD, 5% TZA, 1% TVIX.
The 401K portfolio is in a stock index mutual fund, with QQQ used for performance tracking purposes.
Performance-wise, the 401K portfolio rose 1.91% on the week, and is currently up 9.55% in 2017.
The Index/Hedge/VIX Trader portfolio advanced 3.52% this week, and is currently up 17.41% in 2017.
Chief Trading Strategist
Portfolio Update Archive