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Tipping Point

The chart of my core market health indicators says it all. Weak economy and every other category near zero. This week my measures of trend fell into negative territory, while the other categories are barely hanging on. It appears that the 2020 area on the S&P 500 Index (SPX) is a tipping point. The market needs to bounce here or I suspect the rest of the categories will fall below zero next week.

151218markethealth

Due to the negative reading from measures of trend, the core portfolio allocations change this week. Here are the new allocations:

Long / Cash portfolio: 60% long and 40% cash

Long / Short Hedged portfolio: 80% long high beta stocks and 20% short the S&P 500 Index (or use the ETF SH)

Currently, two of the four components of my market risk indicator are warning. A third is waffling and could warn at any moment. The fourth is well away from a signal, but a sharp sell off would probably take it negative too, which would bring a market risk warning. But for now, there is no market risk warning so the Volatility Hedged portfolio is still 100% long (since 10/9/15).

 
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