Here we are, another Weekly Strategy Session complete, another short call from the model. Therefore, and this is a unique occurrence, I am going into a 3rd consecutive week with a short bias.
The model scored its second highest reading ever, a 3.49. The last two times the spread was this high were February 22nd, 2014 and May 17th, 2015. In both instances of extremely high model scores was saw compressed ranges and a slight upward drift.
There is some supporting evidence to the short bias, including last week’s sector rotations and USD/JPY probing the low-end of its intermediate term range.
But, overall, I am wondering if this sustained overbought status speaks to a major shift occurring in the market. Perhaps a transition away from volatility and a return to docile indices and explosive momentum stocks?
There are a few contextual pieces I will be monitoring this week, but overall I will be playing conservative. Any short duration risk is subject to liquidation and I may add a hedge—most likely a reentry into the biotech short, hopefully at higher prices.
What am I supposed to do? Ignore my own research? Then why do it? For you? It is to strengthen the republic. If I add value and benefit alongside, then I have done my job.
Summary: market model has short bias, but an extremely high reading. The prior two instances of extreme numbers lead to range compression and upward drift. My plan is to raise stops on any short duration risk that starts to work and consider reentering the biotech short.
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Damn…. Been loving the Morricone, btw.
Ennio is reserved for when the bias is short. It just feels right.
If I were a professional pugilist, this would likely be my walkout song.
https://youtu.be/kjB8P-rZG-4