Weekend Update

Current Position: Neutral-Bearish

We believe that further gains are limited at this point. Some decent basing patterns are appearing in IBD 100 stocks, however we feel that higher reward-risk is seen (vs. being long equities) in the following trades:

1. Long US Dollar (UUP).


2. Short gold (GLD).


3. Short FXA (Australian Dollar)


4. Long TLT or LQD (treasuries and corporate bonds).


5. We have initiated partial positions in short equities (QID, DXD, SDS).

Concerns with being long equities include:

1. McClellan Oscillator turning negative for the first time since the start of this rally in early July


2. NYSE Advance-decline EMA 5 dropping to negative


3. Relative weakeness in Nasdaq, where its Advance-Decline has also turned negative and the 2000 level represents tough resistance


4. The firming of the dollar


5. Weakeness in consumer discretionary stocks

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