That was officially one of the craziest weeks in the stock market I have ever been a part of outside of 2000, 2008, and the Brexit. Two in one year. Impressive to say the least. The velocity of the recovery to new highs in the DIA and IWM was not only incredible but stunning as well. Probably even more impressive was the fact that the DJT broke out ahead of the election. The SPX, NDX, and QQQ are lagging right now but the volume in all of the indexes is indicative of a market that should continue to move higher in the short to intermediate term.

One of the most impressive data points from this rally comes from my EOD long scans. My EOD long scans are returning numbers not seen since 2007. For three days in a row my main long scan returned over 800 candidates. That has not happened since the 2007 market top. The other impressive feat was the sheer number of stocks hitting new 52-week highs. This list has exploded as the market has moved higher here. The one data point that is a bit concerning right now, however, is the NYSE ADV/DEC line. This breadth indicator is lagging the overall market really bad and leaves a lot to my imagination.

Still the powerful price advance with the extremely heavy volume can not be ignored no matter if it was a straight up V-ramp off the lows. Heading into the election I stated that if we do find a panic low after the election that we would not just trade straight up and hit new highs. I then immediately checked myself and stated that considering how this market has traded the past two years it would actually not surprise me if we just rocketed straight up hitting new highs. LOL. It actually happened.

Due to the move in the DJIA and the RUT our operational models have switched to BUY in those indexes catching up to the early model switch in the DJT. The Nasdaq, Nasdaq 100, and SP-500 models remain under an operational NEUTRAL condition but those too will obviously switch to an operational BUY signal if they breakout to new highs. This model switch is a signal that I can now operate in a more aggressive manner on an EOD long biased basis than I could before under either a NEUTRAL or SELL condition. It also means that I can allow for slightly looser stops on large positions like CYBE so that I can capture more share of a longer uptrend.

Unfortunately, due to all of the volatility heading into the most recent V-ramp rocket shot higher, I was stopped out of a lot of quality positions which are all now significantly higher. The good news is that I remained around 45% long and those positions, especially the small cap bank stocks, have been rocketing higher. However, it also caused me to lose some decent gains in my hedges and forced me to leave SDOW SRTY TZA with small gains and some leaving me even with tiny losses. The good news is that some of my hedges like JDST DUST and EEV EUM EDZ are continuing to move in my favor. It wasn’t perfect but looking at the big picture I follow all of my rules perfectly and all in all feel well positioned for a move higher.

Notice I said well positioned and not perfectly positioned. That is because I am obviously holding a large amount of cash. I am 50% long, 10% in leveraged hedges that are currently working, and 40% cash overall right now. If all of the major market indexes were at new highs grounds I would be disappointed. However, the SPX COMPQ and NDX clearly tell me that it is not a perfect world right now and considering the gains in the DJIA and RUT I would think some backing and filling (consolidation) should be in order and could potentially lead to some very powerful long signals. This would get me fully invested rather quickly.

All in all, I would have to consider the past week a victory. While I wish I could have locked in some profits in my hedges with the big move in the overnight futures market post-election, it didn’t happen. If it would have, then I would have been stopped out of some of my long positions that are now rocketing higher. Obviously it would have been nice if we would have gapped down just enough for me to lock in some profits on the hedges while at the same time not have any of my stops hit on my long positions. But I don’t live in fantasy land. I know how this market works now. Volatile!

Let’s see if we can not consolidate quietly or continue with the heavy volume gains. The one thing I do not want to see is another potential diamond formation to form. If we rollover from new highs here back below the indexes 50 day moving average on heavier volume then the odds of us re-entering an operational SELL signal will be high. That will be extremely bearish. If we quietly consolidate or continue higher, I am obviously going to continue to operate accordingly. Fun times. Have a great rest of your weekend and I wish you the best during the upcoming trading week. Trade well. Aloha.