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Consolidation Likely

My market health indicators are signalling that some consolidation is likely. All of the core categories are negative with the exception of risk. When this happens it usually signals that investors are taking profits, rebalancing portfolios, and/or rotating between sectors. At this point, I don’t expect a large draw down. It’s more likely that we get some chop (maybe a month or so) before moving to new highs in the S&P 500 Index (SPX).

The movement in my core indicators change the portfolio allocations as follows:

Volatility Hedged portfolio: 100% long (since 5/7/2018)

Long / Cash portfolio: 20% long and 80% cash

Long / Short Hedged portfolio: 60% long high beta stocks and 40% short the S&P 500 Index (or use an ETF like SH)

As always, use your own risk tolerance to manage your portfolio.

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