Trade Anatomy Portfolio
+2.38% MTD | +2.05% YTD
3 long | 1 buy | 0 sells
The overall market has now made it three weeks in a row with the small cap index picking up the pace relative to the S&P 500 and Nasdaq. Not overly surprising that the small caps have had the larger percentage move off the bottom when you consider the depth of its correction. You're probably hearing the word overbought consistently used when someone describes the current market environment and it's easy to come to the same conclusion. When I look at the move over the last three weeks, those same thoughts cross my mind as well. In a perfect world, the next 2-3 weeks would consolidate the gains and then start edging higher, allowing more stocks to develop constructive trading patterns. However, knowing the future isn't a luxury offered and therefore decisions must be based on present information.
At present, the majority of stocks moving higher are those most beaten down over the past year. This is typical trading action when markets initially move off lows and the overall market trend is still attempting to change its longer term direction. For psychological reasons these beaten down stocks provide comfort for many traders. Some of these stocks have probably marked their lows and will begin to rise, but for the majority of these stocks, it will take months or even years for them to gain enough momentum to trend in a sustained positive direction. A look at the weekly chart of both the S&P 500 and Russell 2000 shows improvement, but the overall trends remain negative.
During the week, a new position was taken for the portfolio, bringing the total invested percentage amount to roughly 32%. Our initial open risk was 2% of the portfolio value, but the positions have increased enough in value this week to move our total exposure to around 1.5% if our trailing stops are hit.
Another week and another improvement in the number of stocks passing the initial scan. In total, 113 stocks are now making it through the initial screen process. We're not exactly rolling in it, which is why the candidate's list isn't making a move higher. A very large portion of these stocks still need time to develop, similar to a food dish that needs time for its ingredients to fuse together to create the right taste. Below is a sample of stocks on the current watchlist.