“Safety” Definition Revisited:

Cash is a position. Although many hedge their portfolios not to miss out on potential powerful breaks back to the upside after meaningful drawdowns, there is nothing wrong with moving to the sidelines. One can always reenter, and if one pays up to do so it is in my opinion responsible considering the alternative which could be a substantial selloff. Think of it “like a ball.  You throw it up, it hits the ground, and it goes up again to a lower high, and it goes down again to an even lower peak”. Think of it as insurance on a possible meltdown to your portfolio. Below however is a chart of the pharmaceutical ETF, in the PPH, and it shows an ominous bearish head and shoulders pattern. The right side is still in construction, but it is certainly something to monitor. On the ratio chart on the bottom of the chart, it shows there was an affinity for the pharma’s over the biotechs, but that came to an abrupt end recently. Perhaps growth is just taking a well needed breather, witnessed by the VIX reversing intraday with a firm rejection at its 200 day SMA. Friday should provide some interesting clues, as Monday started in a robust fashion, although we know its not how you begin but how you finish.

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