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Home Portfolio Allocation Archive for category "Long / Short Position"
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Market Quality Goes Positive

Over the past week my measures of market quality have gone positive. This changes the portfolio allocations as follows: Long / Cash portfolio: 80% long and 20% cash Long / Short Hedged portfolio: 90% long high beta stocks and 10% short the S&P 500 Index (or use an ETF like SH) Volatility Hedged portfolio: 100% long (Since 5/7/2018)

 
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Strengthening Indicators

All of my market health indicators are strengthening. Most notably my measures of risk and strength have moved from negative to positive. This changes the portfolio allocations as follows: Long / Cash portfolio: 60% long and 40% cash Long / Short porfolio: 80% long high beta stocks and 20% short the S&P 500 Index (or use an ETF like SH) Volatility Hedged portfolio: 100% long (since 5/7/2018)

 
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Risk Warning Cleared

On Friday my market risk indicator cleared its warning. The core market health indicators are usually much slower to clear so they’re still mostly negative. The majority of them look like they’ll take several weeks and maybe a month or two to clear. This indicates that we’re probably in for more sideways consolidation, but not likely to decline significantly from here. The new portfolio allocations are as follows: Long / Cash portfolio: Long 20% and Cash 80% Long / Short portfolio: Long 60% high beta stocks and short the S&P 500 Index (SPX) 40% (or use an ETF like SH) Volatility Hedged portfolio: Long 100% As always, use your own risk tolerance in structuring your portfolio.

 
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Here We Go Again

My market risk indicator is warning again this week. That means a mid term volatility hedge on all the portfolios or going to cash. Below are the current portfolio allocations. Long / Cash portfolio: 100% cash Long / Short Hedged portfolio: 50% long and 50% hedged with mid term volatility (an ETF/ETN like VXZ) Volatility Hedged portfolio: 50% long and 50% hedged with mid term volatility. My core market risk indicators are also dropping fairly quickly.

 
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Market Risk Warning Clears

My market risk indicator finally cleared its warning that was issued on 2/9/2018. We didn’t get the further downside that I expected (based on the odds), but our longs performed well enough that it blunted the loss from the volatility hedge (which held up relatively well due to a volatile month). My portfolio suffered a .6% loss. I feel it’s money well spent to sleep well at night when the market is in question. Most of my core market health indicators have strengthened since the last update. However, my core measures of risk still haven’t recovered. This measure is longer term in nature than my market risk indicator so it tends to take longer to clear. With everything added up the portfolio allocations are now as follows. Long / Cash portfolio: 80% long and 20% cash Long / Short portfolio: 90% long high beta stocks and 10% short the S&P 500 Index (or use an ETF like SH) Volatility Hedged portfolio: 100% long

 
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Market Risk Warning

I mentioned on Monday that my market risk indicator was warning. It still hasn’t cleared and it doesn’t look like it has a chance to clear by the end of the day. As a result, I’m calling a warning signal. Market risk warnings come in two varieties. Ones that last for only a week or two (a false signal) and ones that last for several months (a significant correction or bear market). This signal has the odds tilted to more downside because the Bullish Percent Index (BPSPX) is below 60. When it is below 60 and my market risk indicator is warns the odds increase substantially (3 times more likely) that we’ve still got at least another 10% drop from here before we make an ultimate low. This isn’t a prediction, merely stating the odds based on history. This signal changes the portfolio allocations as follows: Long / Cash portfolio: 100% cash Long / Short portfolio: 50% long high beta stocks and 50% long midterm volatility (an ETF/ETN like VXZ or VIXM) Volatility

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All Green Again

Over the last week, I saw broad based strength in my core market health indicator categories. My measures of market quality moved back into positive territory. This means that all of the portfolio allocations are now 100% long.

 
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Consolidation Likely

Last week, I mentioned that it might be time for some consolidation. This week, it appears more likely. My measures of market quality have dipped below zero and my measures of market trend are dropping pretty fast. This indicates that we should get some sideways to down movement over the next several weeks. I suspect that the market has at least one more good rally in it, but we’ll need a pause before it happens. The consolidation will most likely be due to rotation out of mega cap stocks into smaller stocks as a “sell the news” event when/if the tax plan passes. With market quality falling below zero the core portfolio allocations change as follows: Long / Cash portfolio: 80% long and 20% cash Long / Short portfolio: 90% long high beta stocks and 10% short the S&P 500 index Volatility Hedged portfolio: 100% long (since 11/11/2016)

 
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This Should Be It

Over the past week, my core market health indicators mostly improved. Most significant is that my measures of market strength have now moved above zero. This changes the core portfolio allocations as follows: Long / Cash portfolio: 100% long Long / Short portfolio: 100% long high beta stocks Volatility Hedged portfolio: 100% long since 11/11/2016   Another thing of note is that we’ve been seeing broad based buying of the stocks in the S&P 500 Index (SPX) again. If the ratio between the SPX Equal Weighted Index (SPXEW) and SPX can get back above its 20 week moving average it will be a very healthy sign. Since the first of the year, investors have favored mega cap stocks. We want to see the smaller stocks in SPX rallying faster than the mega caps as it will indicate broad based buying and increased tolerance for risk. Add to that, SPX looks like it’s now got a clear break above 2500 and we’ve got the recipe for a rally.   Conclusion It looks

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Weakness Without Much Fear

Over the past week, most of my core market health indicators fell. Most notably, my measures of market strength went negative. This changes the core portfolio allocations (below). Another thing that was interesting this week is that the fear everyone is talking about isn’t showing up in my Market Risk Indicator yet. The most sensitive components of that indicator think the saber rattling this week is a non-event event. That’s not to say a negative risk reaction won’t materialize, but until it does we have to operate under the assumption that this event will quickly fade as a market moving issue. The new portfolio allocations are as follows: Long / Short Hedged portfolio: 90% long high beta stocks and 10% short the S&P 500 Index (or use the ETF with symbol SH) Long / Cash portfolio: 80% long and 20% cash Volatility Hedged portfolio: 100% long (Since 11/11/2016) One thing you can keep an eye on is the bullish percent index (BPSPX). It is still a good distance above my

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