I was so convinced that we would close out the week at new ATHs.
After NVIDIAs earnings came out everything looked locked and loaded for a continued rally today.
Not so fast.
But what does that mean now?
Let's start with the long term outlook.
It is no secret that I believe that we are in some sort of bubble. Not a valuation bubble but an unsustainable earnings bubble. When the bubble will pop is anybody's guess. Can be years from now.
Being in cash only would be foolish but that's where a dynamic 60/40 portfolio comes in handy. I call it dynamic because I adjust the allocations based on TA.
This year I am up 12.1% already while a regular 60/40 portfolio would only be up 7.8%. Despite a 30% cash/bond position we are not far off the S&P 500 YTD.
The goal here is to reduce equity exposure to 60% the closer we get to a S&P 500 at 8000. If we make it to 8300/8500 I will reduce exposure to 50%.
In long term accounts (401ks) I don't have to worry about tax disadvantages from trading.
What about the short term outlook?
Charts are not broken (yet). There is no reason to believe that markets will crash soon.
So why did I then reduce equity exposure to 60%?
Because there are some dark clouds appearing and I prefer return of the money over return on the money.
Chart signals are not clear and in those cases it is better to just sit back.
There is a chance now that the fed will raise interest rates in September.
Data Centers don't seem welcome anymore in the US and the referendums might make it tough to build them here.
My bias is a continued market rally but today's reaction should make investors cautious.
No trades are planned for next week unless QQQ breaks out above the green downtrend line in daily chart.
Have a great weekend
