The Pendulum Swings The Other Way

We’re seeing the beaten up areas go up and the winners go down.  So down today are financials, technology, industrials, etc.  On the up side, we’re seeing energy, drillers, steel, agribusiness, etc.  Who can you trust?  I would say right now neither.  I’m using this time to go more neutral on the market.  I mentioned two days ago that the oscillators I watch were short-term overbought.  The real question is will this pullback be very intense or not.  So far, it’s mild.  However, we are seeing weakness intensify in the financial sector.  I’m neutralizing my positions by hedging my longs in financials.  I want my beta to be around 0 right now. 

We’re not at any extremes.  There’s not too much fear and not too much complacency.  Therefore, I believe we’ll continue to pull back very short-term.  That may be a place to cover some shorts (especially in small caps) to get ready for a more reasonable rally.  I still like technology but haven’t bought any yet.  And be careful on biotechs and healthcare, they are still extended.

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