Why it’s time to move from passive to active investing

Last week, I suggested that stocks remain in a difficult and volatile trading range, and that “the time has come for investors to focus on managing risk, not chasing reward.”

In the S&P 500 index, as represented in the spdr s&P 500 in real-time trust (NYSEARCA:spy) last week held an important technical step in as support again and a further bounce from here is really possible. However, some of the most successful hedge funds and other traders, I’m dealing with now work through the prism to look for lower highs ” and ” sell the Rip, but not hoping for a new sustainable highs indexes in the near future.

From the standpoint of money management, I feel that indexing or passive investing crowd became too crowded just how indexes work in some hot water. The stock market traded in positive zone, but almost no memory from day to day as the focus like Heading risk. This type of environment, especially if we are in a transition phase from bullish to neutral from the point of view of the direction of the stock market, will promote the active crowd control, and to disrupt passive investors, at least for some time.

At the end of last week, we entered the reporting season for the first quarter and this may lead to a shift of focus to a more fundamental flow of news from corporations.

While the spy in real-time is still trading at multi-week sideways range with support around 255 $ and resistance at $267. Considering that on the weekly chart below, the spy is in real time now bounces off the lower boundary of the channel, the trader can make a bet here to see the spy rally up in the mid-high $270 to finding other potentially more lower high.

The best part about this trade setup is a very clearly defined stop loss level, any meaningful reversal, and in extreme cases below $ 255 will be the stop loss.

Market participants with less immediate satisfaction of needs might look to simply sell or short the following confirmed a lower high in the SPY real-time.


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Moving averages legend: red – 200 a week, blue – 100 a week, yellow – 50 a week

One part of the market that for the last week and a half has shown noticeable relative strength is energy reserves in the face of the energy select sector DWCPS (data) (NYSEARCA:xle) and oil in the face of United States oil Fund LP (data) (NYSEARCA:USO).

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On the top half of the multi-year weekly chart note that the USO last week broke a year-to-date trading range up on a weekly closing basis last week. In the bottom half of the chart, note the continued relative strength of that oil, ie USO in real-time shows respect to the shares, that is, spy in real-time. Given the recent geopolitical flare-UPS this trend is likely to continue to put pressure on USO in real-time at $ 14 as the next growth targets. Any major bearish reversal is the stop-loss.

There are various strategies to take advantage of the current trading environment. On Tuesday, April 17, I will discuss my favorite of this strategy in a special webinar for Investorplace readers; using the Implied volatility of permanent income. Sign up here.


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Moving averages legend: red – 200 a week, blue – 100 a week, yellow – 50 a week

In summary, it’s choppy and probably lateral movement within a broad trading range should promote active management in contrast to passive investing. Buy the DIP, but the main thing to watch, to sell the Rip.

Check Serge Berger’s trade of the day on April 16.

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To see a list of companies reporting in earnings today, click here.

The list of economic reports this week needs to go, click here.

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