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Market Health Drops Dramatically

Over the past week our market health indicators dropped significantly.  Most importantly our measures of market quality fell below zero.  As a result, the Long/Cash portfolios will be raising cash by the end of the day.  They will both be 40% long and 60% cash by the end of the day (3/14/14).  Our hedged portfolio will be 70% long stocks we believe will out perform the market in an uptrend and 30% short the S&P 500 Index (or simply buy the ETF SH).

There is small chance that we’ll raise even more cash or add a larger hedge if the market accelerates lower in the last hour of trading.  Our measures of market trend are still positive, but could go negative before the end of the day.  If that happens I’ll update the site and do a new post with the details.

Below is a chart of our allocation changes over the past year.  The green lines represent adding long exposure to the portfolios. The yellow lines represent raising cash or adding a hedge.

Here’s a chart with the current status of our health indicators.

 
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