Why I Raised Cash as Sell the News Hits the Ceasefire Rally

Cash

We have a highly emotional market on Wednesday morning as investors react to a ceasefire deal and a sharp drop in oil prices. The S&P 500 jumped over 2.5% at the open on extremely strong breadth, but so far the strength has triggered some selling, and there is steady slippage.

We still have about 75% of stocks in positive territory, but very little is trading at the highs of the day, and there is increased selling pressure as we hit intraday lows.

Anticipation Was Already Priced In

Given how well the market held up over the last few days, it is clear that there was some anticipation of a positive outcome to President Trump's bombing threats. We are now seeing a sell-the-news reaction. The big question is how far we sink before support takes hold.

It is helpful to think of the situation with Iran as a continuation of negotiations rather than a deal. There is still tremendous uncertainty, and we are quickly finding that there is no agreement on many key points.

The most important development is that Iran is now engaged in the negotiating process. They are no longer pretending that there are no negotiations or that they don't want one. However, they are now at even more risk if they fail to keep their word.

What I Did at the Open

I used the opening strength to reduce about a dozen positions and have my cash levels up to around 40%. I'm not bearish. I'm optimistic, but I want greater flexibility to be aggressive with key buys when we have better entry points. This gap-up open does not produce good entries, but it does help charts to develop.

The big technical issue is that the open produced a large gap on most charts. The conventional wisdom is that gaps tend to fill. That may not happen immediately, but Wednesday morning's gap will exert a gravitational pull, preventing momentum from gaining traction.

A few of names I reduced this morning are TeraWulf (WULF) , Roku (ROKU) , and Viavi Solutions (VIAV) . I still like all three stocks, but I wanted to lock in some gains and look for a remount at a later point when the charts have some support. It is purely a trading strategy and has nothing to do with my view of the fundamentals or valuation.

Don't be afraid to sell a stock you love if you think you can create better positioning. Just make sure you are ready to act when the time is right.

One consequence of raising cash this way is that it allows for a much more aggressive posture and mindset when the time is right. I am not just focused on playing defense and protecting gains. I am now looking to take offensive action and move accounts to new highs.

At the time of publication, Rev Shark was long WULF, ROKU, and VIAV.