Over the past week all of our core market health indicator categories rose. This rise came as the S&P 500 Index (SPX) consolidated just below the 2100 level. Our measures of market risk and quality moved from negative to positive. Our measures of market trend couldn’t quit make it. If the market can hold at current levels I suspect our measures of trend will move back above zero next week. Our measures of the economy are still posting sluggish numbers, but slowly improving.
Overall I’m seeing good behavior from almost all the market internal indicators I follow. This suggests the market should rally. As a result, our new portfolio allocations will be as follows:
Long / Cash portfolio: 60% long and 40% cash.
Long / Short portfolio: 80% long stocks we believe will out perform in up trends and 20% short (using SH).
Volatility Hedged portfolio: 100% long (since 10/24/14).
Below is a chart with our portfolio changes over the past year. Green represents adding exposure and reducing hedges. Yellow represents adding hedges or raising cash. Red represents an aggressive hedge using a financial instrument that benefits from rising volatility.