My Market Risk Indicator is signalling today. That means I add a mid term volatility hedge to the Volatility Hedged portfolio and the Long / Short hedged portfolio. The Long / Cash portfolio goes 100% to cash. The portfolio allocations are as follows: Long / Cash portfolio: 100% cash Long / Short hedged portfolio: 50% long high beta stocks and 50% long mid term volatility (or an ETF like VXZ or VIXM) Volatility Hedged portfolio: 50% long and 50% long mid term volatility (or an ETF like VXZ or VIXM) As always, use your own judgement and personal risk preferences to allocate your own portfolios. And, of course, never trade a financial instrument that you don’t understand.
Over the past week my core measures of market strength whipsawed. The category went positive last week, then went back to negative yesterday. Another thing of note is that my core measures of stock market risk fell substantially. This indicates a foundational weakening in market action (as opposed to my market risk indicator which looks for fear in the market). The core portfolio allocations have changed to the following: Volatility Hedged portfolio: 100% long (since 5/7/2018) Long / Short Hedged portfolio: 70% long high beta stocks and 30% short the S&P 500 Index (or use an ETF like SH) Long / Cash portfolio: 40% long and 60% cash
Last Friday my core measures of strength went positive. That changes the portfolio allocations as follows: Volatility Hedged portfolio: 100% long (Since 5/7/2018) Long / Short Hedged portfolio: 80% long high beta stocks and 20% short the S&P 500 Index (or use an ETF like SH) Long / Cash portfolio: 60% and 40% cash