Major Market Technical Changes

Every few years at there is a turning point in every major market cycle and the relative strength relationship between the stock market and the money market switches.  In bull stock markets, the arrow points towards favoring stock ownership and in bear stock markets, the arrow points to holding cash.  There are several other pieces of information critical to successful portfolio management but this one, in my opinion, is the most telling.  This is the final and most important technical measurement I follow and the one that in many opinions dictates a critical tipping point for the longer term direction and momentum in the markets.  Market activity on October 3rd, finally tipped the momentum to holding Cash, a very defensive portfolio position. The last time this indicator changed directions was when it turned bullish in April of 2009 with the S&P 500 at 865.

Now, a logical bounce has followed so I am considering any up day in the market a good day to add to my position of short side ETF's.  DOG, PSQ and FAZ (3x's financial bear) are a few of my favorites in a market environment like this.  I will not usually go over 25 or 30% of the total portfolio into the short side as I am not that risky but, I will indeed short the market.  If you are investing inside of a 401(k) and do not have the ability to own short side vehicles, don't worry. If you are on the sidelines and protecting your principal, that is enough defense for now.

I have not yet updated portfolio holdings or performance in some time as 'daddy duty' has taken over my life, but I plan on deploying about 25% of my cash on the sidelines into an equal portion of the three previously mentioned inverse ETFs over the next few days.  The portfolio will have about 40% Cash, 25% Investment Grade Bonds, 10% Gold and 25% inverse or "short" ETFs.

I'll update the charts and scorecard in a bit but for now, if you have not gotten defensive in the past few months, there is still time and I highly recommend it.  Better to be safe than sorry.

Good luck and happy investing.