Too Much Brandy Already?
Santa's Sleigh Looks A Little Wobbly As We Approach The Close
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Sometimes The Best Thing To Do Is Nothing
by Alex King
As the denouement to 2023 continues in its bonus-enhancing manner, new highs and double, triple tops are being made left, right and center. One of two things happens next. Either equities bust up and through those tops and onto some kind of moon orbit, or, the tops prove resistance and we see a meaningful selloff (within, in my opinion, a still-bullish longer term direction). Hard to guess which and again in my opinion, there is no point trying to guess. Russell 2000 futures made a triple top earlier today - and are heading down as the close approaches. Does that mean they dump tomorrow? No clue. Personally I have plenty of long Russell exposure and a very modest short Russell exposure. That will need rebalancing when the Russell does start to cool off. But if and when it does start to cool off, there will be plenty of time to add those shorts on the way down. Unless the selloff isn't so big in which case there won't be much time to add shorts .... but also no need to add many shorts. Like that.
So for now my own devastatingly insightful strategy is, do nothing. Continue to accumulate unrealized gains on the long side and be ready to hedge these unrealized gains if and when the Dementors get to work on equities.
If you have a moment, be sure to watch our latest video, which explains our method in a little more detail. You can find it here:
Without further ado - let's get to work!
Note - to open full-page versions of these charts, just click on the chart headings, which are hyperlinks.
US 10-Year Yield
S&P500 / SPY / ES / UPRO
Larger Degree Base vs. Bull Case
Base case remains that we are closing in on a Wave 5 high. Bull case is that we are in a wave 3 up. Both counts plotted below. SPY>584 and rising is when the bull case begins to look more probable on the evidence.
Nasdaq-100 / QQQ / NQ / TQQQ
No change to our larger-degree outlook. It will soon be time to test whether our base case is valid or too cautious. Note the QQQ made an all time high yesterday and is currently sat back below it. That could mean that 2023 is merely a 2021 double top before a major league dump. But I don't think that's the most likely outcome.