Sell When You Can – Not When You Must!

Good Morning:

— Our “armchair” M-Squares™ Economic Forecast operates from a simple model. As long as Junk Bond (JNK), Homebuilder (XHB), and Semi-Conductor (SMH) ETF prices confirm price advances in the S&P 500 Index, we want to be long. As long as the Dow Industrial, Transport, and Utility Index prices all confirm each other with higher prices, we are tickled pink to be long. And when the U.S. Dollar and the S&P 500 Index move in opposite directions – life is normal. Same with 10-year U.S. Treasury rates and technology stock prices opposing each other.

— What happens when these relationships shift, or send mixed signals? Generally nothing good. Since we are currently experiencing some of these mixed signals, and S&P 500 Index prices have reached the top of a potential channel line (even slated to gap open above the Daily Expected Move) we are selling 25% of our latest position at this morning’s NYSE Open, acquired when the S&P 500 Index tagged 4775 about a week ago. We will sell this first portion around 4925 (the price at this writing) for a 150-point profit into an overly enthusiastic crowd – likely to give us a little extra premium.

— The market may continue higher, at least into next week’s Fed meeting. Perhaps “Irrational Exuberance” has returned, and Artificial Intelligence is the new Dot Com. But I never worry about leaving something on the table for the next investor. Otherwise, there would be nobody left to buy, right? We retain 75% of our position though we are on pins and needles with it at this price location. Anyway, we love profits – and perfection likely isn’t possible.

— We are keeping our stops two ticks below the 5-day EMA on the remaining 25% of our position.

— As always do your own homework, but at least you know our thoughts.

Stay tuned,

A.F. Thornton