Market Notes

A subscriber asked if I was still in the SPY short or had I stopped out?  Answer:  Still on the short.  It had been noted that the stop loss would be above 208.61 (last week’s high).  SPY hit 208.76 today and I have not even thought of letting that make me cover.

A couple points here…

1) As often noted, any one day can bounce around above and below a parameter and potentially whipsaw a position.  So a few days or a weekly close, or an impulsive move are preferable for decision making.

2) The reason I used a straight short instead of options or leveraged funds is because it lets me be more patient.

I feel that I did not give this position the proper attention in yesterday’s update because that update was more about yield spreads and this short position was partially a result of the condition of yields.  So in mentioning a tight stop “above 208.61” I was very vague.  My apologies on that.

I am holding the short because I have long positions, because it is unleveraged and because I am not convinced the market is in recovery mode.

On the plus side for the market, Small Caps are firm and Biotech has so far held the 50 day moving averages.  Another leader, the SOX is questionable.  If SOX were to get above its MA 50’s and SPY were decisively break above last week’s high (it’s still in that resistance zone) I’d probably think about covering.  But again, the reason I used no leverage is so that I would not feel pressure.  So a ‘tight stop’ might in this case might even mean new highs.

sox.spy

As for the yield spread discussion yesterday, here is what the 10yr yield did vs. the 2yr and 1yr yields.  It was a start but not a trend change yet.  Today there is a pull back in these ratios.  So we remain on watch but not actionable as far as any new trends go.

10.2.10.1