The Neutral Position

Greetings from Times Square in New York City, where I am sitting in my hotel room in what must be earth's most uncomfortable chair. How did they pick these things? I think a milking stool would be preferable.

Of course, a down market would be preferable too, but God's not taking any wishes at the moment. The U.S. stock markets went on yet again to new highs in many cases. Below is the Russell 2000, for instance. For those desperate for a sliver of a silver lining in on a very big cloud, you can at least take heart that there was a spinning top today. But.........big deal. The markets have done little but climb for the past five months. It is absolutely unrelenting.


One fellow wrote and made a good point in the comments section. He said he was a bear, but he had basically stayed out of the market during this time. That actually makes abundant sense. You can have a point of view and still wait for the insanity to pass. You might miss the exact top of the market, sure, but more likely you'll miss a lot of pain (such as the last five months). Having a neutral position makes a lot of sense these days. You can have your opinion, but wait until a better time to act on it!

One mild curiousity is how the $VIX has actually been edging up in spite of the market's strength. The graph below shows how the $VIX and the $SPX have been pretty much mirror images of one another. But the past week, the $VIX has started acting differently. I think last Monday's big drop shook things up.


The Major Market Index ($XMI), shown below, is absolutely in a bullish formation. There's no denying it. I have posted this index many times in the past few months. I keep looking for weakness, but it's not happening. If you're a bull, this is exactly the kind of pattern you want to see.


In spite of plenty of bad homebuilder news, homebuilder stocks have shown recent strength. Take a look at BZH.


I'm loathe to point out short ideas right now, but Capital One Financial (COF) seems so toppy to me I am compelled to mention it again. A person purchasing puts on this might want to make the expiration pretty far out there.


NutriSystem (NTRI) is a stock that had been weak earlier this year. But the volume and strength of this stock have shaped up into something that looks plausibly bullish. A breakout above the (roughly) horizontal line shown would be very bullish for NTIR.