The trend momentum power rating remains a strong 70% downtrend.
Today I will review the big picture now the month of April is behind us.
The first chart below shows the bull/bear cycle indicator for the current decade, with the blue line of the bull/bear indicator at the bottom of the chart continuing to head north, which keeps us in the High Risk blow off bull phase.
The solid red line projection is the path going forward if the bulls are able to prevent the big bear win throughout the year, resulting in new highs to close out the year, following a summer and fall of sideways churn.
The dotted maroon line projection is the path going forward if the bears were to score a big win from this position.
Thus what happens re the bull versus bear discussion depends on just how a deep a sell-off we suffer over the next month or so.
The next chart shows monthly average returns for the NASDAQ during each of the four phases of the bull/bear cycle.
The risk ratings are for buyers of stocks.
Low risk phases (green line) are new bull markets, with such years a near one-way rally with little in the way of corrections.
Moderate risk phases (yellow line) are sideways corrections, or minor bears, post bull years, that end the year at new highs.
High risk phases (orange line) are sideways churn periods that turn into extreme risk – new MAJOR bear markets underway (maroon line) - once the bears score a big win on any of the corrective attempts, while new highs going into year-end can be expected if the bulls are able to keep their buy the dip nirvana survival mojo going throughout the entire year.
The current NASDAQ (black line) continues to track the orange line expectation, and poised to begin a sideways churn period, with the depth of that expected selling dictating whether the bears secure, or fail to secure, the big win that kills the current bull to begin the next MAJOR bear market.
The final 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 NASDAQ is closing tracking the purple line of 1987, which would suggest the first correction is behind, and the meat of the blow off bull just ahead. Such a continuation of the rally would be great for our QQQ and QLD position, though brings us closer to the bull to bear turn.
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 rose 2.59% on the week, and is currently up 15.29% in 2017.
The Index/Hedge/VIX Trader portfolio rose 4.73% this week, and is currently up 28.03% in 2017.
Next update after the markets close Monday.
Have a great weekend!
Chief Trading Strategist
Portfolio Update Archive