Smart Money Indicator Signals a New Shift to Cash
Dan Murphy of Joshua Tree Financial publishes an email alert titled MillionDollar Target. He’s managed a private fund for decades and after research into the smart money buying in the market, created what he calls the ‘Smart Money Indicator’ (SMI). It processes the internal trading of the largest market movers and from that generates signals for medium and long term shifts in market direction. His SMI switches between long, using the ETF SPY, or short the market with the ETF TLT.
During 2017 the SMI has indicated a long in the market, but in September it signaled a switch to short the SPY, and go long Bonds via the TLT (iShares 20+ Year Treasury Bond). On November 27 it gave a very unusual signal for the SMI; to go 100% to Cash. So not long in Bonds (TLT) or the SP500 (SPY), but time to sit on our hands on the sidelines. The market internals appeared to be very ambivalent, and in the past such internal weakness has foreshadowed a market correction that surprised the Bulls.
Now on April 8, 2018, the SMI still signals a cash position in the long term investment portfolio. Looking back on the first three months of 2018 we can see that the market turbulence certainly indicates a loss of trend. If guided by the very dependable SMI, the wise market position is neutral until the next trend is clarified.
Consider laying in a hedge to protect your portfolio such as I outline in my free e-book, “Black Swan Protection for your Stock Portfolio”.
My Black Swan hedge has done very well in 2018 with a +200% gain on risk when the market dropped 10% in early February. This would have more than covered a [-10%] portfoilo loss.
Since February the increased market volatility has required an adjustment from the normal strategy. During the long bullish uptrend a monthly schedule was used for close and open of a credit vertical option spread, and a roll forward of the long Call. Using several indicators on 30 minute charts I’ve been able to sell new verticals when the VXX has spiked up to 50+, and to buy new long Calls when the VXX dropped to <40. These positions have been closed in profit when the VXX pivoted to its opposite extreme. This volatile rotation in the market will likely continue until either the market crashes, or restarts a Bull trend.
I’ve allocated about 15% of a live account balance to the hedge positions. Since January 2018 the Black Swan Hedge has generated +300% on margin at risk, and +56% on the total portfolio balance!
Please download my e-book, paper trade the hedge, and consider if the method is appropriate for you.
You’re also invited to drop Dan Murphy a note and ask to be included in his free monthly email SMI alerts. He has an amazing track record.
You can contact him at; email@example.com .