We are in midst of baton transfer..

This might seem to be a writing on the wall now but we are not there yet. We are gradually approaching the correction phase. If the market craters through 1358, the bulls will officially sign off.

We have seen all the phases of transition –

  1. Broken almost 5 month old trend line.
  2. Market tries to capture it but fails.
  3. Market breaches 50 DMA.
  4. It tries to recapture the moving average but fails
  5. And finally we are staring at a lower low after lower high.

This is an old school failure. The shorts will show up every where. Unfortunately if we review last two summers this market might end up going sideways. So be careful while shorting.

I already have 15% of my portfolio invested in TLT, BLV and RWM. I will add some more once the down side is confirmed. As of now I don’t see too many obvious shorts. All the good stocks are either in consolidation phase or approaching 50 DMA.

Portfolio is already 50% cash – will try to create more cash.

Let’s browse some charts. One thing is clear – all the recent breakouts have failed. This is a strong indicator of weak market. Leaders are either consolidating or trying to hang on to 50 DMA. Remember in a correction, leading stocks decline by average 2-2.5 times the general market correction. The ones that end up correcting the least and have strong fundamentals are prospective leaders of next bull market.