We plan on expanding on this thought process with members over the next few days and weeks, as the S&P500 starts the week near 2800.00 (+/-). We plan on rebalancing our portfolios a little differently, focusing on a process slightly varied from the last bearish cycle.
Summary
This weekend was filled with chores and some reading about inflation. Those of you that know me have heard me speak of my late father whom I admired. A blue-collar worker that survived the Korean War and the last major inflation cycle in the late ’70s. He locked the family savings up for 5 years in CDs making more than 16% compounded.
To be clear, this is OUR CURRENT POSITIONING; this is not a recommendation. Consult your financial advisor when considering rebalancing your portfolio with respect to your exposure to inflation.
Alternative assets are where we plan to focus on. That percentage will rise. For starters, we’ll consider scaling back our exposure to equities.
The top three inflation-protected assets we are considering are TIPS, Leveraged loans, and AGG, the Barclays Aggregate Bond Fund. We have funds in this instrument already. We’ll probably add to the position.
Treasury inflation-protected securities (TIPS), a type of U.S. Treasury bond, are indexed to inflation in order to explicitly protect investors from inflation. Twice a year, TIPS payout on a fixed rate. The principal value of TIPS changes based on the inflation rate, therefore, the rate of return includes the adjusted principal. TIPS comes in three maturities: five, 10, and 30 years. – investopedia
With the FED printing money to infinity. That money will cause inflation unless something is done, like raising rates. While we can debate the effects, we’d rather focus on positioning our assets.
The Money Supply: M1, M2, and M3 are measurements of the United States money supply, known as the money aggregates.
- M1 includes money in circulation plus checkable deposits in banks.
- M2 includes M1 plus savings deposits (less than $100,000) and money market mutual funds.
- M3 includes M2 plus large time deposits in banks.
S&P500 SPY ETF
Our current asset positioning benefitted from the rapid rise since March 23. Now we intend to bank some of those gains.
As price action consolidates below the 200d, we are considering rebalancing, as futures trade in this zone as of 8:40 AM EST.
Overall the market is stable. Sectors are still making higher lows, but the S&P500 is still below the 200d. Price action was rejected at 61.8% Fibonacci. Key levels are 280, and 2800 for the S&P500. These are in focus today.
The 2800 strike is very important as it is the last strike with moderate call positions. The large amount of total open interest at 2800 may prove to hold the market, but should that level break we see mainly large put positions below. – spotgamma
S&P500 Sectors
Technology is surprisingly strong, followed by the remaining SPDR sectors, all of which continue printing higher lows.
We’ll cover these potential alternative assets with members this week.
With this in mind,
Join us today in the trading room for our LIVESTREAM broadcast
during market hours, as we navigate the current environment. Watch, listen and trade from 9:20 AM to 4:15 PM Monday through Friday.
Happy Trading,
Vinny
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