Current Positioning Shifted to Market Neutral SPY QQQ IWM
Near midday, we hedged a bit more with SQQQ as the Nasdaq selloff accelerated. We’ve been nibbling on SPY common and will consider IWM small caps today depending on market conditions. We are basically market neutral.
Summary
SPY QQQ IWM – Market Neutral
With the positioning in SQQQ yesterday, and additional positions in AWF and AGG, we are hedged for more weakness. If the markets do plunge further SQQQ should appreciate quickly.
The trading room is already aware of potential hedges in SQQQ, SDOW, and TVIX. Mikey also mentioned these over the past couple of weeks.
We also considered hedging with SPXU, and SDOW over the past few weeks as all three moved above the 200d. The reasoning for opting to go with SQQQ was simple. FANG is getting thrown out with the trash.
SPY – Market Conditions
Weakness persists in SPY, despite early morning strength. That strength has faded as the S&P 500 SPY traded below the ATH yesterday (-11.62%) before buyers (shorts) covered in the last 15 minutes of the session. SPY trading range Monday exceeded 10 points.
That said, we have observed TICK cumulative closing higher each of the past 8 trading days. The only way TICK can rise on a cumulative daily basis is for institutions to be buying more stocks on the uptick versus what they are selling on the downtick. In other words, we’d need to see a sudden drop in TICK to get more bearish at this time.
SPY is trading higher in the pre-market session. Futures are higher. Caution is still warranted, so we will stick with our hedged positions and keep our cash for a day when buyers are clearly evident. We don’t anticipate institutions will do anything until after mid-term elections.
LRN and LOPE were mentioned as potential trades Monday morning. Both closed higher. TWTR, VZ, WMT, and KO are also trading higher in the early session. We sold JNJ and PFE yesterday.
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Happy Trading,
Vinny
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