Last week, I recommended that being short the market was a good strategy. As such, we entered into a number of short positions. One of those short positions was stopped out during the Wednesday bounce in the market. The rest held through the bump and finished the week nicely higher as the market moved lower.
You can expect more bumps in the days and weeks ahead.
Nearly all of my technical and fundamental indicators are recommending either to stay in cash or be short the market. In my managed accounts, I am about 30% short. I may move that to 40% short this week.
By the way, I need to make sure that I am clear about how I make trades and trade recommendations in my managed account business (www.sabinalcapital.com, my subscription business, www.cycleprophet.com, and my free market commentary, which is this newsletter). Some of you have complained about why I am not providing every one of my subscribers and clients with the same identical trades. Allow me to explain.
Sabinal Capital Investments, LLC, is a Registered Investment Advisory. I am required by law to give preferential treatment to my managed account clients. They get the best trades that I can make and the most timely. The regulatory constraints on an RIA is very clear in this regard. If I publicly recommend a trade or if I choose to make a trade in my subscription-based company (CycleProphet, Inc.), I must have either already made an equal or better trade for my Sabinal clients or have decided that the trade is not appropriate for my Sabinal portfolios. "Not appropriate" does not mean that the trade is not a good trade from my perspective... it just means that the asset allocation or the trade will create a conflict with the existing trades in the Sabinal portfolios.
Simply put... if you want my best trades with the best timing that I can possibly provide... you have to be in one or more of my managed account portfolios.
- Every trade that I make or recommend is a trade that I believe has the propensity (not the guarantee) of being a profitable trade. Last week, for example, in my managed accounts, we entered into a put trade for EWZ. We also recommended an EWZ put trade for my CycleProphet Trades subscribers. By law, I was required to make the trade first in the managed accounts. In the few minutes that elapsed between placing the trade in my managed account portfolios and when we could release the trade to the CycleProphet Trades subscribers, the market had changed slightly. The stop loss we had for the Sabinal clients was slightly lower since our entry price for the Sabinal clients was slightly lower. When the market bumped higher the following day (Wednesday), the stop loss for the CycleProphet Trades subscribers was triggered while my stop loss for my Sabinal clients was not triggered. As such, my Sabinal client accounts kept the short position on EWZ and finished the week with a nice profit while my CycleProphet Trades subscribers stopped out of the EWZ trade with a loss. Am I happy with that? Absolutely not. Are my CycleProphet Trades subscribers happy with that? I am sure they are not. There was no indication last Wednesday, as to whether the market was going to continue to move higher and stop out our managed account trade for EWZ, as well. The fact is the market did not stop those trades out. It is merely a fact of the trading strategy and the timing of the trades. By the way... there have been times when the reverse of this action has occurred. We have been able to enter a better trade for our CycleProphet Trades subscribers. We have entered the trade for our managed account clients and then entered the trade for our CycleProphet Trades subscribers; but due to the fact that the trade for the CycleProphet Trades subscribers was made a little later in the trading day, we were able to get a better fill. The SEC requires that I give my managed account clients "First and Best" preferential treatment "to the best of my ability". That, we always do, but sometimes, being second, rather than first, gets a better fill.
- This newsletter is free to anyone who wants it. Presently, we have a little less than 17,000 readers of this weekly missive. Many of my newsletter subscribers are also subscribers to my CycleProphet services and/or are Sabinal clients. This letter is intended to give you a perspective on the market that you won't get elsewhere and, hopefully, provide you with information that will be useful to your trading strategies. I happen to believe that economics, markets and politics are inextricably linked. Some of my readers do not believe that politics have anything to do with markets, but I am just as equally convinced that they do.
Subscribers to this newsletter live in virtually every corner of the world. Most live in the USA, but certainly not all of them do. I get feedback from many of you each week and I read every email and respond personally to everyone that is directed to me. Most of the feedback I get is well thought out, cordial and positive. Sometimes, I get a snarky comment from someone who either takes issue with me on my conservative Judeo-Christian point of view or from someone who thinks I should take a stand on market forecasts and never change...
Regardless of the type of response I get, I appreciate the effort that anyone takes to write to me.
But, since this newsletter is intended for public dissemination, I do not try to include too much information that I think should be reserved for my paying subscribers and my managed account clients. This is a fine line. I want to provide you with useful, trade-able information, but reserve my best recommendations for my CycleProphet Trades subscribers and, of course, my managed account clients.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer