In my last post, I indicated that I observed a descending RSI on the weekly charts that spans the last 18 months. I looked at a similar monthly chart over the same period and observed the same descending RSI (see below). I believe that when a longer term chart mirrors or confirms a shorter time frame (weekly), the signals are more significant. As shown in the monthly chart below, June will close out with a lower RSI
after having made a new high during the month. In my opinion, this is significant. Although we have a few more days left in the month, it is highly unlikely (improbable) that the RSI will break the descent. For this reason, I plan to add to my short position tomorrow on any apparent weakness. I will add to my position in SH so that its total value is
30% of the value of my long position -- this addition represents another 25% over the 5% position that I established last week.
After I add to my short position, it's likely that I will not do anything further to protect my long portfolio. After I make the aforementioned trade, my portfolio will be comprised of the following: 40% dividend stocks, 48% cash, 12% short. As I mentioned in a prior post, I believe that being net short would be too aggressive. Time to sit back and see what happens.....
