Today brought some changes to the portfolio. Before I get to those, I'm starting to change my tune about this bear market rally. I think it may stall out before the Dow breaches 12K after reading this market outlook, found via Daily Options Report:
Trader's Narrative also recently lamented the limp market by pointing out the recent rallies off of oversold levels have been getting smaller and smaller.* Liquidity Drying Up - I see that Rennie Yang, author of the excellent Market Tells service, observes that 20-day volume in the stock market has made a seven-year low. "Once in 2004 and a couple of times in the 70's NYSE volume hit a three-year low," he observes, "but this is the first time in the last fifty years we've seen it hit a 5-year+ low. Volume is not just low, it's really low." Of course, it's not just that volume is low; it's that we are seeing reduced volume following a bounce from the mid-July lows. If you think in Market Profile terms, this means that higher prices are failing to attract participation--not something you'd expect to see if this were a fresh bull market leg.* Checking Readership - I've mentioned on a number of occasions that the readership of this blog tends to spike during bear market swings and pull back during bullish moves. Since the summer of 2007, this has formed a rather accurate timing tool with respect to intermediate-term market tops and bottoms. The pattern of readership of late has been consistent with tops, not bottoms, in the market.
* Hmmm... - Yes, the market looks weak right now, and I wouldn't be surprised to see us test the July lows before too long. That having been said, I notice that we're knocking at the door of multi-month highs in retail stocks (RTH) and that we're posting multi-week highs in housing stocks ($HGX). Not exactly what you'd expect if all were going to hell in a handbasket...a lot of issues might be setting up for non-confirmations of any test of lows.
So the nattering nabobs of negativism convinced me to make some changes to the portfolio.
On the selling front, I unloaded the entire UYG position at $22.64, for a gain of 6%. Click on the chart below for some technical justification for today's sale.
Conversely, I initiated a swing trade by buying shares of the ultra-short financials ETF (SKF) at the bargain price of $109.99. The SKF position is approximately one-fourth the size of the closed UYG position. The short-term trading thesis for the SKF position is to sell if SKF moves into $130-$140 range, and swing back into UYG below $19.
Of course, there's a clickable annotated chart of SKF, if you're interested:
I also put my money where my mouth (pen, keyboard, whatever) is and purchased some gold ETF shares (GLD) at $78.95. Below are two informative GLD charts, the first a daily chart, the second a weekly chart:
If you need some hearty fundamentals after all this technical chartastic mumbo-jumbo, The Big Picture offers up a Bloomberg piece pointing out that Wall Street analysts are far too optimistic about corporate earnings, further cementing my bearish outlook.