Bears are winning today

Market Mood

The last time we spoke the market was tending in the Bear direction. I say “tending” because I wasn’t ready to call a trend.  The market has been overdue for a correction and maybe this is it.  Today the market barometer ended in the Bear/Angry mood.  What does this mean?  This means that the underlying TtM catalog entries roll up to a very sour mood.  Is it sour or sweet?  Let me toot my own horn a bit and say that if we had followed the advice of the TtM barometer we would either have shifted our investment positions to cash or predominantly short positions.  On October 13 the recommendation was “25% Long, 75% Short, or 100% Cash.” Today the barometer advises us to eliminate the last of the Long positions from our portfolio.

barometer

Some will say, “what if the market turns around tomorrow?” Good question.  It may turn around tomorrow.  If it does I’ll think about changing the mix in my portfolio.  It happens.  Let me ask, “what if it doesn’t turn around tomorrow and actually takes this opportunity to correct itself by 10 or 20%?”  I for one will take that chance.  I’m all short but for the most part my short positions are SH and PSQ.  These are inverse to the SPY and QQQ ETFs which replicate the S&P 500 and the Nasdaq.  These are not known for their volatility so if we do have an up day tomorrow I’ll give back some of my gain.  Since I started adding the short positions the SH and PSQ are up over 5% and 6% respectively.
Let’s take a look at this on a graph. This graph shows the Market Mood for the past few days and today it is Bear/Angry.

MoodLog10.15

What’s nice about the graph is you get a visual of the mood over several days. When I present this graph it will generally show the mood for the past week or so.  Maybe once a month I’ll generate this graph for the previous month.  It’s labor intensive to generate this so we’ll see how often we want to see the longer time period.  Let me know if you would prefer two weeks as opposed to a single week.  At any rate this is what it looks like today.

Two Day Long/Short Reports

One thing I find curious is the number of stocks which changed state to Bull today. Since much of the market is not having a good day I would expect the number of securities changing state to the Bear state would far outnumber those changing to the Bull state.  That’s not the case and is a data point (we’ll store that away in case the market reverses in the next day or two).  The 2 Day Long report contains 138 entries while the 2 Day Short report contains 100 entries.

Today’s Long Report is shown below.
LongReport10.15
Now let’s look at the Short Report.
ShortReport10.15
Report Analysis:

I mentioned the Long report had 138 entries. I’m only showing those which TtM tagged as recommended for possible investment.  TtM implements my strategy for selecting investment grade securities.  At some point I will have the resources to present the entire report (both Long and Short) which you could use to implement your strategy.   The same goes with the Short report.  What I’m showing is only the symbols which are recommended by TtM.

Now – out of these let’s look at ATRC and DE from the Long report and TMH from the short. Not only did TtM indicate these 3 securities have a high probability of a positive return on the investment (high Win Probability) but I also like what I see in some of the other TtM indicators.

ATRC

 

ATRC looks like it has potential. Today it closed at $15.29.  I see potential resistance around $19.00 but it has also closed as high as $22.18.  If we’re conservative and say it could go to $19.00 that is still a 24% gain.  I’m sticking to the TtM Market Mood barometer’s recommendation of 0% Long so I won’t add this one.

de

 

DE is interesting. Today it closed around $85.  Looking at the resistance I’d say it is likely, at a minimum to go into the $90+ range.  DE had some volume behind todays gain and several of the moving averages TtM computes are all pointing towards near term increases.  Again, I’m not in the market for a Long position but you may be.

TMH

 

TMH is the only Bear state transition we are looking at today. TMH closed around $55 and has a sample low of $36.68 (wouldn’t that be nice).  I see possible support at ~$42 but that is a nice 30% gain (short position).  If you didn’t get that, TMH is one I would possibly short today.  This stock transitioned from the Bull state to the Bear state.  Therefore, if I held a long position I would sell that and consider shorting (sell short) this stock.

Summary

We’ve looked at 3 stocks out of 238 that changed state today. I set the minimum stock price to $10.00 so the catalog contains around 2100 stocks – down from 2500.  I did this because I’m not really inclined to invest in an $8.00 stock so I don’t need the overhead associated with maintaining those stocks in the catalog.  There is no limit to the size of the catalog other than the time associated with periodic regeneration of the feature vector (uniquely defines the stock’s characteristics used by SMM, the TtM monitor) and the daily updates.

All of these looked like potential investments. Each had a potential gain of 15+% which isn’t bad.  This is the fantastic benefit of TtM.  TtM calls the state changes (trade signals) and provides crucial information necessary to make an informed decision on whether you want to invest in that security.  Now that you may be using the recommendations from TtM I’ll start posting updates on what those positions are doing.  I’d recommend you track your own investments but I will provide the “Symbols In-Use” report.  This report contains a list of symbols that were called out in the Long/Short reports by TtM.

We’re all good for now. The market is not happy but those of us that short sell are.  Also, since we’ve all said, I wish I knew when to get out and when to get back into the market, I’ve just told you.  It is time to get out and at least position yourself for a market correction.  What TtM can’t tell me is how long or how deep the correction will be.

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