Diary of a Financier

SPX update: Upshifting to neutral

In Capital Markets, Trading Desk on Wed 13 Mar 2013 at 19:48

I’m still following that 2006 analogue for the S&P 500 (SPX).  I’ve recalibrated it a bit, and we’re back on track.  Expectation from here is still for [yet another] 3% pullback over a little more than 3 weeks, before a 5-6% rally takes us into the summer:

SPY 2006 v 13 (daily)

SPY 2006 v 13 (daily)

The weekly fractals remain in lockstep too, concurring with my thesis:

SPY 2006 v 13 (weekly)

SPY 2006 v 13 (weekly)

In conjunction with this analogue, an analysis of the daily SPY chart makes this recent spike to new highs appear as if a classic bull trap peeking out above trendline resistance of SPY’s primary trend, a bull channel:

SPY daily- bull trap

SPY daily- bull trap

After some recent trades,¹ I’ve ushered the portfolio back up to benchmark-weight at a 0.76 beta, however our allocation is light with a 50/38 stocks/bonds mix (12% cash).  Obviously, my positioning is fully premeditated, as I’m saving cash to buy a dip, while our high beta won’t let us miss any upside.  That beta leverage comes from low index exposure, high beta singlenames, and a fair amount of high yield & floating rate exposure in our fixed income sleeve.  Our positioning will remain, regardless of my outlook for the next 3% +/-, as I’ve learned not to run and hide to sidestep a mere 3% downdraft.

–Romeo

¹See this week’s timestamped trade reconciliation over at StockTwits

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