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Daily Trend and Trade Review

February 23, 2017

Trader Talk

The trend momentum power rating remains a strong 70% uptrend.

The set-up calls for a very fast swoon that soon dies, as the VIX near doubles near overnight, marking a stock market trough, just as everyone decides to sell.

This is the usual pattern at this stage of the high risk blow off bull cycle, with the trading plan calling for doing the exact opposite as everyone else, especially in regards the hedging side of the portfolio.

Note the daily ADX (grey line) moved into the peaking and turning phase, after hitting its third highest level in a couple of years.

We could easily see a 2%+ one day wonder move, though the more likely outcome is a rapid four-day event that accelerates the losses each of the four red ink days.

We expect the indicators in the chart below to move rapid from overbought to oversold back to overbought again, which will be our trigger to adjust positions.

Of particular note, investor sentiment just hit its highest level since 2013, bolstering the corrective bear case.

For now, holding longs while hedged remains the optimal allocation.

Current positioning for the Index/VIX/Hedge Portfolio is 94% QLD, 5% TZA, 1% TVIX.

The 401K portfolio is in a stock index mutual fund, with QQQ used for tracking purposes.

Kevin Wilde Kevin Wilde
Chief Trading Strategist

Portfolio Update Archive

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