Week 18 SPX Sectors Trending and Performance + some trading notes

General Trading Notes

The Friday trading took back half of my gains from the first 4 days of the week. But I am OK with it because I stuck to my system and was disciplined to not deviate from it. I could have as it was very possible that after 4 days of down days Friday would be an up one. But I cannot operate that way. The trending was down, and the probabilities were on my side. So, although I lost on Friday, I am OK as I played my system.

In reality, the fact that we had a down day after 4 up days was quite arbitrary. There was no way of predicting that. The down day could have come on the 3rd day or the 4th day or never come at all. So, effectively, if I had closed all my trades before the close of day 4 (Thursday) I would have been unscathed on Friday trading. And I would also have been lucky. (As you know I have been positioned short the equity markets and long the precious metals. So, Friday was a bad day for me).

One day does not change a trend. The market’s trending is still to the bearish side although less so. I continue to be positioned short the equities and long the precious metals. Having said that, turnarounds in markets do also do sometimes happen with a big reversal day and the market uses that momentum to make the trend reversal. I will surely be on the lookout for that. But until then I will stay the course.

I will review the SPX sectors now.

Trending Heat Map

Note: changes reflected are from Tuesday after close trending. So, changes in last 3 days of trading.

The most important thing I notice is how the trendlines and the price are some closely bunched together. This is not ideal as the trend indicators jump around a lot and impacts the efficacy of my system. From a trading perspective, my system becomes volatile and unstable.

This situation has been developing for some time and it seems is close to resolution one way or the other. If this bunching up continues for much longer I will consider staying away from making trades until the trending expands. I think it is close to that situation.

Other than that, the trending changes themselves are very mixed. I cannot discern whether the markets want to go up or want to go down. There seems to be even balance between the bulls and the bears. From my system:

Perfectly Bullish (1): XLP

Perfectly Bearish (2): XLF, XLE

Short-term Bullish (0):

Short-term Bearish (8): XLY, XLV, XLU, XLRE, XLK, XLI, XLC, XLB

So, I have to conclude that I am right to say that the markets are trending bearish and the risk is to the downside.

Performance

Reminder why we see some of the numbers as we see them (especially the year-to-date numbers).

XLY has AMZN and TSLA

XLK has MSFT and AAPL

XLC has META and GOOGL (plus NFLX)

To summarize, April was somewhat up. May so far is mostly down or flat with big losses for the XLE and XLF.

There was a guest in CNBC who proclaimed that sell before May and go away. So far, he is right, but May just started and there is more than half the year still in front of us. As stated earlier, I continue to remain positioned short the equities and long the precious metals. For now.