Today was pretty uneventful but also interesting. I only had two trades the entire day. I scaled back SWHC to its original position size and I add a 2% long position size in BIG with a stop at $16.38. It was mostly a day of watching and also a profitable one. This was extra cool since my portfolio is delta long and still up pretty nicely on an overall down day.
What occurred today was that many of the junk long stocks had good days even with the broader market plunging. Part of it was the financials having a good day even with the rest of the market down.
MBI +22% RF +11% HIG +13% GE +5% XL +9% (all approximate %s)
But note it was only a select group of financials. UYG was up less than 1%.
But look at some of the junk longs in other sectors:
TXT +6% DRYS +10% GT +11% MGM +17%
While I cannot honestly tell you why this occurred, what I can tell you is that today’s down day was quite different than what we have seen in a while. This is significant in technical analysis. To me, technical analysis is in a nutshell the study of “what is different here.”
As a market observer, it is quite unique recently to have a select group of financials doing so well when the rest of the market is tanking. It is even a bigger deal when a mixed bag of other non-financial junk stocks perform well. The price action today was unique.
My hypothesis is that these stocks are some of the stocks that have been murdered the most recently and that either shorts are easing up on their short positions or longs are starting to see value in these names. In any event, this might mean that this group is the first one to start the short term reversal I have been looking for.
I also found it interesting that the precious metals did poorly today. My GLD short is starting to work. Recently, the trend has been for the precious metals to rally on the down days. Again, all I glean from this is something was different today from the other down days but that in itself is quite meaningful. TLT was also down today meaning that along with gold there was no “flight to safety.”
The QQQQs tested the November intraday low.
$SPX is looking like it is following my map. The low today was just above the 671 FL and the high was right at the 693 FL. I encourage you to click on C&C Fib Levels in the right hand navigation menu. These have been working great for a while now.
I continue to feel confident about the risk/reward of being long right here. I feel comfortable with the absolute near term floor being at 600 verses a top at 805 which creates a favorable risk/reward. As I mentioned yesterday, I don’t think there is enough downward juice left to hit 600 meaning I believe my margin for error in being long early is really 644 and not 600. For now, the 671 FL is holding like champ.