The Winds of Change 4/15/12

I heard a great talk this weekend by Dennis Stearns from the Stearns Financial Group. He was the guest speaker at our local AAII Chapter meeting on investing. More on his talk next time. For now I am looking and seeing the winds of change starting to whisper.

As I pointed out last week, I was surprised with a down signal on SPY. I also keep track of the ratio of number of Advancing/Declining stocks. That too turned in a down signal last week. GLD has been in a down signal for a month or so and so has Oil (OIH).  CAT has been in a down signal since 2/8/12. Guess what has turned in an up signal? TIP and TLT. These are bond funds and show the mood shifting from stocks to bonds. As I have pointed out before, I try not to align myself with a single idea and try not to be too predictive long term; but short term, the winds of change are towards the down side on equities.

I hold a position in AMD that is still in a long signal but has been a slight loss. Earnings report is coming in this week and I am going to close the position before earnings announcement. It is too much of a gamble and I have no idea where the odds are. So best to stay out. I am holding down put positions, albeit small in SNDK which has continued to slide. I am still long HOG which is barely holding up. I am also long my 401K equity funds. I will start adding to my hedge positions (with SPY put options) against the 401K as well as buy some TLT at market open Monday and sell AMD. Eventually if this is the beginning of a slide, my 401K positions will shift towards bonds but since it is a slower reacting system, I will wait for it to tell me so. The winds of change appear to be blowing and I am getting protective on my portfolio.

I will buy commodities like Oil and GLD when I see up signals. As Dennis pointed out there are some good double duty positions one can take to hedge, like Oil and Gold. I agree but my preference as an individual investor is that I can be more nimble and will get into those with tactical asset allocation. That means I will get in when I see long signals from the technicals for the double duty hedges. The bond funds are signaling up in the meantime.