The market is a little bit turbulent in these two days, after a very rare (low probability event) 10-day consecutive rises of the DOW Industrial Average Index which is consisted of a small number of large companies. The major indices are presenting some weakening signals but not enough for me to consider a bearish market turn yet.
The Nasdaq is weaker than the SPX and its new highs – new lows accumulative index is turning down today. If the same index for NYSE also turns down for a couple of days as explained in my previous post, I would consider an intermediate bearish turn of the market and start trading with bearish positions.
In the meantime, the volatility index VIX is jumping relatively high when compared to its high at early July. This is not a confirmative posture for a real down turn of the general market since it indicates a lot of people are already in fear even though the price has not dropped much.
Yesterday, I closed my EPI position by selling it at $26.66 as shown below and posted the trade in my StockTwit. The profit taking decision was based on my analysis of the target price of the stock chart mainly.
I think the large and rapid drop of the US Dollar in the last month also played a role for me to consider exiting the emerging market for now. I felt the USD’s fall contributed to the dramatic rise of the emerging market ETF’s. These profitable rises for my EEM & EPI positions were nice in the past month. But USD, as an intermarket signal, seemed to start a turning process after the over-sell condition. Therefore, the USD price action and the rare consecutive rises of the DOW Industrial average make it easier for me to take profit when the emerging market ETF’s reached the price target.
My portfolio is on the light side as I sold most of my short near and intermediate term bullish positions. I’ll need to build up new bullish positions when the market gives bullish continuation signals. Yesterday, I entered a long term bullish position for REM with a purchase price of $46.83, a mortgage REIT ETF that provides good dividends (> 6%). I intend to hold this long position for a long time, unless it signals break-down of long term bullish trend. This ETF follows TLT trend in general, but outperform it with a large degree.