The trend momentum remains a strong 70% uptrend.
Overall, the AK strategy remains 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.
The first chart below shows the usual trading pattern when in high risk blow off bull years – which is the phase of the bull/bear cycle we believe we are in - overlaid over some past blow off bull years, with the white lines to the left of the chart the NASDAQ for 2017.
The prime question remains, whether we are in the peaking area of the starting rally - where a swoon and corrective churn is underway – versus the rally pushing to the 20%+ gain area for the NASDAQ on the year, which would put us in the middle rally position sooner than we expect?
Such a continuation of the rally would be great for us, though brings forward the financial day of reckoning to the spring/summer, rather than the expected fall, when bull is expected to turn a bear, potentially with a crashing start,
The dotted red line in the next chart remains the projected path going forward, as a series of ever-increasing zigs and zags land over the next few months, where each dip leads to higher prices, and every move higher is followed by a larger corrective swoon.
The red arrow is the expected fate once this staggered melt-up bull topping process completes, and the next great bear begins.
The daily ADX (grey line) continues to fall hard from the third highest level in over two years, indicating a sideways churn period and potential change in trend is underway.
The indicators shown in the chart below smashing into the oversold extreme will be our cue to adjust positions, especially on the hedging side of the portfolio.
For now, holding longs, while hedged, remains the optimal allocation.
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 fell 0.8% on the week, and is currently up 10.02% in 2017.
The Index/Hedge/VIX Trader portfolio fell 1.29% this week, and is currently up 19.27% in 2017.
Next update after the markets close Monday.
Have a great weekend!
Chief Trading Strategist
Portfolio Update Archive