It has been another intense January in the SharePlanner Splash Zone. If you look back at the last two January trading months in 2014 and 2015, neither months have offered calm seas for trading instead they have been trying months that test one’s resolve. That is the case here again in January 2016. Right now, I am down 3.7% on the year against a market that is down 8.0% on the S&P 500, 10.4% on the Nasdaq, and 11.3% on the Russell. In fact this start to the market is the worst we have seen since the Great Depression.
So are we in normal market conditions, for even a bear market? No. This month alone on the T2108 chart has put us at oversold levels that have only been seen a few times going back to 2009 when the market bottomed, 2011 during the European summer crisis, and then again in August of last year when the market had a major sell-off. Yet up to this point, the market has been unwilling to bounce off of such extreme conditions, and conditions which, in the past have provided high trading success rates.
Against the backdrop of what I have just described, I’m not filled with angst or worry when it comes to our trading so far for 2016. I’d be much more concerned if the market was trading sideways or higher and we were down down 3.7%. But that is not the case here. That doesn’t mean we can’t short the market either, and as I’ve shown regularly in the past, I can short the market and do so successfully. I’ve gone to great lengths as to why I have not been aggressive to short side in this market in 2016 and much of it has been due to the large gap downs early on in the sell-off, with lack of downside intraday momentum, followed by aggressive intraday selling as the sell-off matured and was already extremely oversold. I’d recommend reading through some of my recent posts made in the Splash Zone to further read up on this.
So why the UPRO trades and so many of them. I agree, we have traded them quite a bit of late, and historically they have been great trades when looked at the summation of their returns from 2014, 2015, and 2016 among other ETFs. Keeping my portfolio light as I have done throughout the sell-off (i.e. not going 70-100% long during this time) and not taking the brunt of this sell-off as most investors and traders will have done, has given us the ability to play with these ETF types. The outcome/returns with them is not where I’d like for them to be at this point, but I still firmly believe in my ability to trade them.
And if you are worried about the start to this year, don’t be. This isn’t my first rodeo, and not my first 3% pullback in the portfolio, yet every year I have hit my mark and made a profit out of this market and I expect the same to be true here yet again in 2016. While others may spike the football in regards to their short-term trading success, and proclaim some greater market understanding than the rest, we will continue to push forward, taking it trade by trade knowing at the end of the year, it will add up to something very special.
