Over the past week all of our core market health indicators fell. This isn’t encouraging considering the fact that the market rebounded from weakness early in the week. It is starting to feel more like a top building than simple rotation. If your portfolio was weighted toward momentum stocks it hasn’t felt like rotation for a few months. As you know, we don’t make changes to the portfolio based on our feelings, we simply follow our indicators. None of our indicators fell enough this week to change our current allocations. Our hedged portfolio is still 70% long and 30% short (using SH). Our long/cash portfolios are both 40% long and 60% cash.
I usually show our portfolio allocation changes against the S&P 500 index, but the recent divergence between indexes doesn’t give an accurate picture for people with higher beta portfolios. So here’s a chart with SPX, the NASDAQ and the Russel 2000. The green lines represent adding long exposure to the portfolio (and removing hedges). The yellow lines represent raising cash, reducing longs and adding short positions.
Here’s a chart with our current health indicator categories.
