Topping patterns

I am still slightly long overall on my portfolio, despite my hedge on my 401K and put positions on a stock. Why might you ask? Because this market has been very strong, and the 50 day exp moving average (ema) of the price which is a red line on the chart below, is well above the 200 day ema which is a black line. In the last 10 years, I have never seen a V topping pattern. Tops take longer to form and it must have something to do with our greed index in that no one wants to miss out on a run up. As soon as we see any signs of upward action after a correction, we pile back on. 

My SPY charts have been saying exit long since my Feb 23^rd posting and I probably could have just gone neutral and dropped out of stocks then. But my 401K system is more momentum based and on a once-a month look. I have already made those picks and I have started adding bond funds back in; but it is still heavier to stocks just now. My SPY put options on my long positions help counter-balance the drops but not enough.

I guess I am expecting this drop will either stop at the 200 day ema or go slightly lower and then bounce back up. The 200 day ema is at 126.24 and is awfully close in value to the previous support on the SPY at 125.28.  I would say we are in for a bounce after that.

The fear index or VIX is at 18.86, which shows hardly much fear at all. It is serious volatility when it gets above 40. Then why are we starting to feel a few pangs of fear seeing the 401K drawdown some and the profit from this year disappearing? Am I more fearful than usual? No – it is mainly because with my systems, I am rarely in the middle of those bad situations where the market is dropping 400+ points and I am holding on waiting for it to be over. I am usually out in bond and cash funds by then. So everything tells me we have not seen any huge drops and that we are still profitable for the year and there is more upside left.  But the charts are weak so there is no need to stay too long.

My trigger to turn very negative will be when the 50 day ema drops below the 200 day ema. Even after that, price tends to try to bounce and break through the 200 or 50 day ema and there are plenty of opportunities to get out using a decent bounce. But one should be very wary on long positions then and I will be posturing to make some money on the down side instead.