Facebook Twitter Gplus YouTube E-mail RSS
magnify
Home Featured Market Health Falls Perceptions of Risk Fall
formats

Market Health Falls Perceptions of Risk Fall

Over the past week most of our measures of market health fell. Measures of trend rose and perceptions of risk abated a bit.  The market is trying to bounce, but isn’t showing the type of strength usually associated with a short term low.  While underlying internals are deteriorating, price for the S&P 500 Index (SPX) is painting a pattern that often marks the halfway point in a short term decline.  The pattern is still short in duration and will require a break below 1770 on SPX to increase the probability of a continued decline.  A few closes above about the 1820 level would negate the pattern and suggest the market will rally higher.

Our measures of the economy, market quality, and strength all fell sharply.  Our measures of strength fell far enough that we’re raising some cash in the long/cash portfolios and adding a larger hedge to the hedged portfolio.  The long/cash portfolios are now 60% long and 40% cash.  The hedged portfolio is now 80% long stocks that we believe will outperform the market in an uptrend and short 20% using the ticker symbol SH (or shorting SPY).

Below is a chart showing the portfolio changes over the past year.  Yellow lines signify raising cash or adding hedges.  Green lines represent adding longs to the portfolio and removing hedges.

Below is a chart with the current market health conditions.

 
 Share on Facebook Share on Twitter Share on Reddit Share on LinkedIn
1 Comment  comments 

One Response

  1. Hans

    Very nice review indeed..We are now 50% cash and 50% short with a tight stop on all positions.

Add Comment Register

Leave a Reply

Your email address will not be published. Required fields are marked *

HTML tags are not allowed.