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Weekly Trend and Trade Review


April 14, 2017


Trader Talk

The trend momentum remains a strong 70% uptrend.

By the time the markets open Monday we should have a much better idea of how things look on the political and war front regarding North Korea, where the world expects North Korea to do “something” to mark their 105th anniversary of their founding, which likely pushes President Trump to do “something,” with that "something" having the potential to push North Korea toward full on war mode.

Much of the weakness to end this week, as the VIX hit a multi-week high, was related to such fears regarding North Korea.

If the weekend passes without any notable event overseas then we should see a big rise for stocks on Monday.

If the US bombs North Korea nuclear sites, or shoots down any missile North Korea fire, then the markets likely tank badly Monday as the world waits to see the extent of North Korea’s reaction.

If the US acts, and North Korea reacts, then the markets should start to climb, then take-off, from whatever hole they find themselves in.

Thus, the markets are very much held hostage to news event surrounding North Korea.

Technically, the markets remain poised to take off to new highs again, though likely have to fall some more to push the majority bearish ahead of the expected reversal. Thus, the charts fits with the war fears outlined above.

In the bigger picture, 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, with sideways churn that has a bullish bias till later this year the most likely outcome of all.

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 I 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 larger corrective churn is on deck next – versus the rally pushing to the 20%+ gain area for the NASDAQ on the year without such any larger pullback, 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.

Note the white contrarian line near the top of the chart is now moving fast toward the oversold zone, albeit a couple of weeks behind schedule. That contrarian line suggests we are a week or so away from hitting an important bottom for stocks.

The dotted red line in the next chart remains the most likely 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 first dive fits with the mini-crash fear event going into this weekend’s showdown with North Korea, where the chart predicts the US will indeed have some kind of military intervention with North Korea, though things soon calm as fear turns to optimism.

The red arrow is the expected fate once this staggered melt-up bull topping process completes, and the next great bear begins.

Since political and military events are extremely difficult to predict, the indicators shown in the chart below will tell when it is time to adjust investment positions.

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 1.19% on the week, and is currently up 10.29% in 2017.

The Index/Hedge/VIX Trader portfolio fell 2.09% this week, and is currently up 18.95% in 2017.

Next update after the markets close Monday.

Have a great weekend!

Kevin Wilde Kevin Wilde
Chief Trading Strategist
AlphaKing.com

Portfolio Update Archive

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