Feeling a bit cautious

We’re at an interesting point in the market where it could be turning but it is certainly difficult to read. Chinese tech is still under pressure while the US Nasdaq remains near all time highs. Breadth is still low, meaning most of the strength lies in the biggest 10 companies. Similar story in the S&P 500 and the DOW. The Russell 200 is a bit weaker, but still well within the same range as the last 6 months. While we could form a rolling top here, we could also see another burst to the upside.

There are certainly risks in terms of the political cycle, as the last of the stimulus rolls off and the infrastructure plan is likely to disappoint (chart source noted in red):

Precious metals had a nice rally last week, which pushed my portfolio up to gain 5.7%. That is certainly nice, but we’re still fighting a bearish technical picture and there is a decent chance of revisiting the March lows at some point. I’m just holding here, as my positions are large enough already and it could break either way.

I am tempted to buy some more defensive positions, such as TLT calls on a pullback or EEM puts if it rallies back to 54. I’m a bit more cautious about trying to bet against the S&P 500 or the Nasdaq though.

Here’s my portfolio today:

  • DOWNSIDE BETS (29.5%)
    • 22.2% TLT Calls
    • 5.8% IWM Puts
  • 1.4% EEM Puts
  • PRECIOUS METALS (43.8%)
    • 10.3% AG (Silver), mainly shares some calls
    • 8.3% SAND (Gold, Silver & others), all calls
    • 5.1% EQX (Gold), shares & calls
    • 4.6% SILV (Silver)
    • 4.3% LGDTF (Gold)
    • 3.9% MTA (Gold & Silver)
    • 3.3% SILVRF (Silver)
    • 1.6% WPM (Gold, Copper & Silver), all calls
    • 1.3% RSNVF (Silver)
    • 0.6% SSVFF (Silver)
    • 0.7% GOLD (Gold, Copper), all calls
  • OTHER COMMODITIES (17.1%)
    • 5.8% NOVRF (Nickel/Copper)
    • 6.3% CCJ (Uranium)
    • 3.5% UUUU (Uranium, Vanadium, Copper)
    • 1.5% BQSSF (Uranium)
  • CANNABIS (5.1%) split btw CRLBF, GTBIF & TRSSF
  • CRYPTO (2.3%) all ADA
  • CASH (2.2%)

I was a bit nervous about losing my CCJ position again on Friday as I had $18 and $19 covered calls which just expired. I kept it though. That has been a great one for covered calls for me in general because they are often priced quite high.

Aside from that, I did take advantage of that hit in Chinese Tech stocks to sell off all of my EEM puts that had a Jan 2022 expiry. The strikes were way out of the money, but at least the increased downside volatility allowed me to salvage something out of them.

As for crypto, I actually sold 1/4 of my position in ADA back at the lows a couple weeks ago and I’m just holding the rest. I’ll re-assess whether to add or not over labor day weekend but I’ll let it sit until then. It’s important to wait a month before re-purchasing after selling at a loss to avoid triggering “wash sales” which basically don’t allow you to deduct the real loss. It might seem funny, but I can add to my miners when they plummet and feel confident that they’ll bounce back at some point, while I always tend to be nervous about the valuations of crypto assets.

Anyway, I’ll probably be thinking defensive these next few months, holding what I have while building a bit more of a cash position.

About johnonstocks

I've been trading stocks since 2003, active on Motley Fool's discussion boards and using first Hidden Gems, then Global Gains. I no longer have the newsletters, but I keep up on the WSJ and read David Rosenberg everyday at gluskinsheff.com. Education: CFA level 2 candidate MBA-focus in Finance, Marshall, University of Southern California - expected Dec 2010. BS Mechanical Engineering, UC San Diego, June 2002
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