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However beautiful the strategy, you should occasionally look at the results.

Winston Churchill

The COT index number swings positive this week at + 13.1%, which is a big swing from the [-20.2%] of last week. We had market weakness last week which was signalled by the COT, although of late, last three months it has been very patchy. Until further evidence is furnished via consistency, I will take the signal with a grain of salt. However, the large swing should be considered along with the rest of the market information.

Technicals

The five day chart has signalled a change in trend, however, I would expect in the early part of the week, Monday, Tuesday, a rising market continuing the momentum, which may then reverse the down trend. This should take us to the current $170.35 resistance point.

On the ten day chart there is resistance at $170.oo, and then resistance again at $171.5o.

Obviously combining the two charts and the obvious trouble area where I would expect a little chop is around the $170.00 area. The trend should on the five day time frame correct itself, although that dynamic may not have enough time to play out this week.

Economy

There seems to be a growing consensus that economies are and particularly the US are growing again. The evidence from earnings season does not really support that view as topline growth has been very difficult to find for most companies reporting. Cost cutting and efficiency, while important, do not suggest economic growth.

The one area that has in the past indicated that there has been a recovery close to hand has been autos. Ford seems to be in expansionary mode as do Daimler and Toyota. GM is ticking higher, but Tata and Honda are not following the group.

Autos are generally early, but reliable historically. That this has been such an inflationary period actually is not that much different from other periods where inflation was also a prominent factor.

While I still remain sceptical, I also remain in the market as my strategies are based on markets that rise and fall, the fall being an important component. Therefore if the recovery is real, well so be it, and if it is not, and another serious market decline ensues somewhere down the road, there will be new buying opportunities.

At the moment, mostly, I am selling down positions that I bought up to two years ago, except for commodities which I am gradually adding to building the positions. I have a sell order in SPY at $171.50, which looks as if it may trigger over the next few weeks.

I have some emerging markets which might trigger a buy order, one which I added the other week, ECH.

This week’s trade is again a market neutral trade. It is a financial, KKR the buyout team. There is plenty of time on the trade, March 2014, and while there is nothing in the immediate future that suggests a big move, it does pay a significant dividend of 7.86%. It has just gone ex-div, but in this market there are big investors still searching for yield, this may trigger their interest which should see the stock higher.

Trade:

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