- Tag Archive for "vxz"

Risk Rising

Published on January 14, 2015 by Blair in Market Comments, Market Risk

Once again our core measures of risk are negative. They’ve been there all week long. I suspect that it will take a close above 2050 on the S&P 500 Index (SPX) by Friday to get the category positive. That’s about the point where SPX has been when the risk measures flip. If they are negative on Friday the Long / Cash portfolios will go 100% to cash. The hedged (Long / Short) portfolio will be 50% long high beta stocks and 50% short SPX. Our market risk indicator has three of four components warning at the moment. The fourth component continues to slowly fall, but hasn’t gone negative yet. The volatility hedge is still 100% long and will stay that way unless the fourth component falls by the end of the week. One thing I’m seeing is a lot of mixed signals…I’ll post more about them on Friday, but here are a few examples. NYAD advance / declines are acting well, but the percent of stocks above their 200 day

Tags: hdge, sh, vxz

No Comments

Risk Off

Published on November 5, 2014 by Blair in Market Comments

The last dip in the market caused some damage to the psyche of market participants. So much so that they are exhibiting signs of reducing risk in a variety of ways. Here are three examples. First is high quality bonds (LQD) against junk bonds (JNK). The damage done to junk bonds in July and October isn’t being repaired. People are shying away from junk. Which means they’re starting to get worried about cash flow and the ability to repay debt by middling companies. I’d like to see JNK start to mirror LQD again to give an all clear signal. Next is high beta stocks (SPHB) against low volatility stocks (SPLV). The October sell off did a lot of damage to high beta stocks that was largely recovered, but low volatility stocks held up and have sped to higher highs. This indicates some rotation to safety during the last rally. A move to higher highs by SPHB will be the first step in repairing this relationship. Another indication of reduction of

Tags: hdge, jnk, lqd, sh, sphb, splv, vxz

No Comments

Softening Hedge

Published on October 24, 2014 by Blair in Featured, Hedging Strategy, Long / Cash Position, Long / Short Position, Market Risk

Our Market Risk Indicator cleared its warning this week. However, our core measures of market health are still mired in negative territory. As a result, we’ll be softening the hedge in the hedged portfolio and staying 100% in cash in the long/cash portfolios. To soften the hedge we’re removing put options and/or volatility products. For the model portfolio we’re selling ETFs or ETNs like VXZ, VIXM, or XVZ and replacing it with at short of the S&P 500 Index (you can use the symbol SH). The end result is a portfolio that is roughly 50% long stocks we believe will outperform in an uptrend (high beta stocks are likely candidates for the hedged portfolio) and 50% short the S&P 500 Index. Below is a chart with the changes in our portfolio allocations over the past year. Green lines represent adding exposure, yellow lines are reducing exposure (and adding SH as a hedge), red lines are market risk signals where the hedged portfolio uses instruments that benefit from increasing volatility as

Tags: market health, sh, vixm, vxz, xvz

No Comments

Another Heads Up

Published on September 24, 2014 by Blair in Market Comments

Our measures of trend have been bouncing back and forth across the zero line this week and are currently negative. If they are still negative on Friday we’ll be raising more cash and/or adding a larger hedge before the week ends. Here are some of the things I’m watching at the moment. The actively managed short ETF HDGE is currently rising even though a simple short of the S&P 500 Index (SH) is trending lower. This indicates that shorting selected stocks is starting to work. This often happens before the general market falls. In addition, mid term volatility (VXZ) is rising as well. This indicates that investors are getting nervous going into the end of the year. Small cap stocks (IWM) broke below the triangle I’ve been watching with an associated break in momentum from traders on Twitter. The negative gap in breadth between small and large cap stocks continues to grow. While everyone is watching small cap stocks I’m seeing deterioration in large caps under the cover of new

Tags: hdge, iwm, rut, sh, spx, spx200, spxew, vxz

No Comments

Market Update

Published on July 31, 2014 by Blair in Market Comments

Today didn’t do much damage to our core indicators, however, two of the four components of our Market Risk Indicator are warning. A third component is very close to warning and it won’t take much to trigger it. The fourth component is further away and will take a sharp down day like today to make it warn. I just wanted to give you warning that there may be changes to the core portfolios tomorrow (Friday). I’ll update the site and post to Twitter and StockTwits by 3 PM Eastern what our allocations will be going into the close. IF the risk indicator signals the hedged portfolio will go 50% long and use the other 50% to hedge with a mid term or dynamic volatility instrument like (VXZ, XVZ, or VIXM). If you don’t like volatility ETFs then a managed short fund like HDGE is an alternative. For those of you who use put options the strategy would be to stay 100% long, but cover your complete portfolio with intermediate term

Tags: hdge, spx, vixm, vxz, xvz

No Comments

Shorts are Working But No One is Scared

Published on May 16, 2014 by Blair in Market Comments

The Active Bear ETF (HDGE) is rising, a short of the S&P 500 Index is falling (SPX), and mid term volatility (VXZ) is falling. It tells a simple story. Shorts are working, but not affecting the market, nor causing any fear.

Tags: hdge, sh, vxz

No Comments

Mid-Term Concern Still Present

Published on July 29, 2013 by Blair in Market Comments

Although I don’t see very many near term concerns in the market, we are seeing some cautiousness by longer term investors. One of the things I like to watch is a comparison between a S&P 500 short (SH), an actively managed bear fund (HDGE), and mid term volatility (VXZ). As the market started to decline at the first of May we saw a slight rise in HDGE which signaled that people were starting to short the market, but were being cautious in pressing them. At the same time VXZ started to rise much more rapidly, which indicated that investors who hedge their portfolios with futures or options further out on the curve were adding protection. VXZ rising shows investors placing bets that the market will become volatile sometime over the next four to seven months. The taper talk by Bernanke caused another surge higher in VXZ as people started targeting September to December as the beginning of the end of QE. Once other Fed officials started making dovish comments much

Tags: hdge, sh, vxz

No Comments

Strong and Weak Stocks Diverging

Published on July 8, 2013 by Blair in Market Comments, Social Media Stock Sentiment

Every weekend I review the charts of the 50 most active stocks on Twitter then place them into categories. This past weekend I noticed that the number of stocks in a confirmed downtrend is growing. In addition, the number of stocks in a confirmed up trend is growing too. The number of stocks that are unclear, showing a divergence, or indicating that a counter trend move is falling. This is somewhat disconcerting for the longer term because it suggests that market participants are piling on to the strong stocks and ignoring the weak stocks. This type of divergence is often one of the first signs of a thinning market. The value players have stopped trying to pick up stocks in down trends while the momentum players are buying anything in an up trend. Our concern is that we may be in the early stages of a blow off top. We want to see this situation resolve with more interest in the weak stocks and also some divergences in sentiment for

Tags: hdge, sh, spx, vxz

No Comments

Volatility Suggests Caution Warranted

Published on March 5, 2013 by Blair in Market Comments

We’ve shown this chart a couple of times over the past several weeks, but it continues to give warning as the market rallies higher. A short ETF for the S&P 500 Index (SH) is making new lows today as the S&P 500 Index (SPX) is breaking above its recent range. However, a managed short fund (HDGE) is not confirming the move lower in SH. As we’ve stated before, this condition warns of a larger and more sustained correction than many traders currently expect. Now we’re seeing volatility diverging from SH as well. In the bottom panel of the chart below we show mid-term volatility (VXZ) as an example. Since we’re intermediate term investors we prefer to watch mid-term volatility rather than daily volatility (VIX). VIX moves around too rapidly for us to get much good information about future market potential. By looking at volatility further out on the term structure we get a better feel for a longer term trend. What we look for is a spike in VXZ after

Tags: hdge, sh, vix, vxz

No Comments

Short of S&P 500 Index Outperforming Aggressive Shorts

Published on November 12, 2012 by Blair in Market Comments

If you read our weekly market overview you know that we had a hard time finding any good news in the internal indicators last week. When so many technical indicators are negative we think it’s good to look for anything positive to see if it has meaning for the market. If you look at the chart below you’ll see that just before large market declines HDGE often trades higher while SH trades sideways. This condition happened before both the 2011 and 2012 declines. Today we’re seeing a contrary divergence where SH is trading higher and HDGE is trading lower. This tells us that the weakest stocks are not being sold en masse. Instead, enough of them have been bought over the past month to cause HDGE to trade lower. At the same time large cap stocks as represented by SH are being sold more aggressively. This is not a condition that generally precedes a sell off. When an unusual condition occurs, we as investors need to take note and try

Tags: hdge, sh, vxz

No Comments

Page 1 of 212

Risk Rising

Risk Off

Softening Hedge

Another Heads Up

Market Update

Shorts are Working But No One is Scared

Mid-Term Concern Still Present

Strong and Weak Stocks Diverging

Volatility Suggests Caution Warranted

Short of S&P 500 Index Outperforming Aggressive Shorts

Current Market Conditions

Categories

Featured Topics

Archives

Downside Hedge