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Christmas Day in Japan – US Equity Capitulation, Short Covering in Dow

Christmas Day in Japan - We Focus on Capitulation, Short-covering for the Dow, S&P 500

Today is Christmas, December 25 but we are in Japan and this of course is a holiday for shopping and dating – young people and married couples have a special day today – so it is acceptable to write for Classiarius. But the important point is that the US equity market is now in what clearly is a free fall and it will continue into January 2019.

We are looking at the Dow Jones Industrial Average and the 21,500 to 21,200 range as a window to start covering shorts. We have looked at the 20 percent fall from highs in 2018, and feel that US indices could fall another 5 to 10 percent in the coming weeks. However, covering shorts and looking for names that are beaten down is the mode we would like to be in now. We continue to focus on the oversold names of Nasdaq as tech has suffered and will likely produce, as a sector, some solid winners for 2019. Those of you who know us know that we like buying oversold names and implementation at reversals are the trades we invest  a lot of times in – for a snap back rally. 

The panic cycle is such that we think the window to cover shorts will come fast at the end of 2018 or the beginning of 2019. For now cover shorts does make sense as we look for new longs patiently. 

Have a great Holiday, but consider covering shorts…..We will be updating you along the way.

Team Classiarius


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