Quad 2!
It looks o.k., but not outright bullish. Let this rally prove itself!
Last week I called it a “constructive Quad 3” (therefore the “*” at the 3).
Not going all in here, I am calling for a Quad 2, but to get really bullish the SPY has to close above the 4-week moving average —> Yellow line! (therefore, Quad2 with a “*”).
And the recent lows HAVE TO HOLD on the basis of the close of next Friday!
Plus, we need a breadth thrust here and a bit of basing of breadth before.
Stuff like that (beginning of Jan. and March of this year!):
The hedges for my small cap value momentum strategy book stay on, I want to see much more strength (if I lift them, I will post on Twitter). Here is the hedged version —>
It needs to look like this for me to get really exited (new high while SPY still deep in a drawdown, last October) on my small cap value momentum stuff —>
The ETF Portfolio sample portfolio from last week:
A bit of a drawdown!
I get rid of USO, OIH and XHB.
I add KWEB and CIBR (showed good relative strength, both bullish trend!).
So here is the new allocation:
This is a risky allocation since Quad 2 is not confirmed yet.
Do not follow, use your own discretion!
My best guess is we need a bit more disappointment here, the last weeks have been nerve wrecking, but that is not how trends turn. They turn in despair and disbelieve.
Mid - end (!) of October gets seasonally really strong, also breadth wise! Again, gun to my head: We are not there yet a 100%. One or two really bad flush days next week while we hold the lows and a stronger Quad 1-2 exposures reading on the close of next Friday would be great.
The best scenario (which I think is unlikely) would be a huge selloff from here with an undercut of the lows of last week. I guarantee you that then almost nobody will believe in any rally (happened mid-March and the beginning of January!) with bullish factor readings.
Look, if this has legs, we have a ton of time. No need to rush it here, let the market prove itself.
All right, have a great weekend.
All the best and best regards.
Andreas
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