Thoughts on positioning

Potential use of this site and methods depends entirely on your role in markets, and then whether you are a more active trader or fund or long term portfolio manager or investor, as recently discussed here

If you are in the investor category, then the simple point of recognizing from the very first week of the year that stock indexes were acting in a way they haven't since early 2008, and acting accordingly, would now be looking quite good. Limiting or potentially even completely cutting exposure to stocks and buying the safe havens were recommended over and over on this site most especially 1/4-7 when the yearly pivots on all main USA indexes were breaking, and so far has been the right move. I understand this option is not possible for all participants, but from my view, there is no need to own an asset class in a long term downtrend (ie below both YP and HP), especially when that is coming after a multi-year run of being almost entirely above. And even a second breakdown of those levels to boot.  

But what if stocks rebounded? OK, if NDX reclaimed its YP or any other major index then I would have shifted back bullish. But that didn't happen. 

If you are in the trader category, either as an individual or fund, then there are a lot more possibilities. Use the calls and methods in a way that works for you. Today I wanted to discuss examples of how I am thinking about positioning. 

Let's start out by saying we have about 20 units so each is 5% of portfolio. I am not going to get into leverage possibilities here. This could be divided up into all kinds of ways. You could have done very well the past 2 years having 10 NDX and 10 IBB when max long. So just because I am saying 20 units doesn't mean 20 different things. But mostly I am thinking 4-5 major positions with 4-5 units each.

If you were following along, you would have been buying USA leaders (most likely concentrated in QQQ since NDX / QQQ was the only index to hold its YP on the August drop) in early October. Let's say you got up to half long 10 units. But there wasn't really a reason to be max long because there were global indexes and oil still below all pivots, as well as weakness in IWM and NYA. I pointed out short possibilities of EEM FXI PIN RSX and EWZ in November, but with their volatility might be thinking 1 each for total of 5. PIN would have been stopped out as it participated in the late December rally. I wasn't writing about oil so much in the fall, but it too has been below all pivots since 11/5 - and still below today! But maybe you took your gains on the 2015 low called here.

OK, year end you had 10 QQQ or some combo of QQQ and SPY; 4-5 emerging market shorts, and recently out of oil. If you were at screens maybe you would have thrown on IWM shorts 12/30-31, but at the time I was emphasizing the 2016 open above all pivots so let's not assume that. 

1/4/2016 open all of a sudden instead of above 4 pivots it is above 2 / below 2, really no reason for position at this point. Cut half and hold above the YP, so 5 QQQ, 5 shorts, 10 flat. 

1/6 there was a definitive rejection of SPY YP and on the same day TLT jumped above 3 pivots. You could have shorted SPY there full position 5 units or skipped the stock shorting and done a larger TLT position. To be fair, TLT was still under its YP at the time so a few possibilities. If short SPY 5 units then long TLT 3 units. If not short then 7-8 units long TLT. NDX definitely broke its YP on 1/7 so that was time to completely scram from any remaining QQQ longs. 

The crucial decision in terms of positioning is whether you want to short stock indexes. If so then by necessity less capital for safe haven longs. But you could just as easily skip shorting or do in a small way and own more safe havens. Hey, I have no problem being 50% long in the strongest asset class, TLT, and saving the headache of bear market rallies.

So safe haven concentration idea without shorting would look like this:
Early January 7 TLT, add to 10 above the YP. 3 out 2/12, then back in. 
Late January 3 GLD, add to 5 above the YP and/or add on GDX.
Then there was still room to play the bounce on DIA or emerging market indexes, probably up to 5-7 and not more was prudent, and now out of most of those. 

If shorting then you just have less TLT (so 5 instead of 10 as a max) and use those units to short, so:
1/6 5 SPY shorts, 3 TLT longs, 5 QQQ longs from Oct, 3-5 emerging market shorts mostly from November
1/7 QQQ longs cut. 
And so on as above for the safe havens. 
1/20-22 said turn and SPY target delivered, so probably out of shorts there. 
2/2 was clear rejection of FebPs and chance to re-short.
From 2/12+ we were playing the bounce. Would it make sense to go up to 10 longs ie 50% when stocks have reclaimed only a monthly pivot? Probably not. Probably max of 7 with 2-3 DIA, 2-3 EEM, 2 added 2/22 which were quickly cut. 

Between yesterday and today the FebP recovery attempt has failed and so if following along you would have been cutting most longs yesterday, perhaps holding some of the profitable DIA, and adding back some shorts. I suggested combination of USA on QQQ and XLF and also China since FXI didn't reclaim its FebP when others did. 

So approximately 5 TLT, 5 GLD/GDX, let's say 2-3 DIA longs if holding and some equal or more amount of shorts. And maybe 1 bitcoin :) This would leave you with 3-5 units flat in cash as well.  

Please do it your way but this is how I am thinking about it.