I am happy with how the portfolio has formed up during the last couple weeks. Of our 8 present positions, 6 are winners, one is breaking even, and one is a small loser. A number of of the shares have been in an uptrend as properly. In the interim, we’ll (seemingly) give attention to smaller adjustments similar to trimming or including to positions. We’re at about 70% allocation of our money, which I feel is affordable on this surroundings. Issues can change in a rush after all, however I am content material with the combination of shares we have now within the portfolio at the moment. Let’s check out what is going on on within the S&P 500 (SPY) week. Learn on for extra….
(Please get pleasure from this up to date model of my weekly commentary initially revealed June 8th within the POWR Shares Below $10 e-newsletter).
Market volatility has actually come crashing down for the reason that debt ceiling scare ended with hardly a whimper. We’re seemingly experiencing the summer season buying and selling doldrums, the place not a lot occurs within the inventory market from a macro perspective.
You possibly can see within the chart above, the SPX (S&P 500 index) has breached the two-standard deviation higher barrier.
That does not essentially imply shares are going to unload because the bands are fairly slender on account of a decrease volatility surroundings. Nonetheless, imply reversion is a positively risk within the coming days (simply because of the legislation of averages).
Whether or not the market stays on this low volatility surroundings will principally be decided by what the Fed says and does on the June and July FOMC conferences.
We’ve got the June assembly coming subsequent week after which it will not be a shock to see an entire lot of nothing within the markets till after Independence Day.
The market continues to foretell a pause in fee hikes for June. The futures market exhibits a 72.5% probability of the Fed doing nothing to charges subsequent week.
Financial information has been combined to the purpose the place the Fed can seemingly justify not rising charges (instantly). After all, they will accomplish a few of their objectives by jawboning (e.g. speaking down the market).
In July, futures are exhibiting a roughly 65% probability of a fee enhance. That tracks with the mainstream narrative.
It has turn out to be obvious that the Fed is not executed elevating charges. Nonetheless, at this stage, they don’t seem to be in as a lot of a rush to hike.
Shifting on to grease, West Texas crude has been a bit unstable these days. Saudi Arabia introduced manufacturing cuts, and the value of crude briefly spiked. Nonetheless, it is come again right down to round $70 per barrel.
Keep watch over oil because it may very well be a number one indicator for the financial system (and thus, shares). A value too excessive or too low is mostly not good for shares (for various causes). Nonetheless, the place we at the moment are by way of value is just about a non-factor.
As talked about earlier, volatility, as seen within the VIX chart under, has come crashing down in latest days. The value is now firmly under 15, which is usually thought of a low-volatility regime.
Whereas we might see a short-term spike based mostly on the information cycle or the Fed, I count on volatility to stay comparatively low.
The summer season months are usually slower by way of realized volatility (the precise motion of shares). Thus, implied volatility (ahead trying) tends to come back down as properly. That is not less than a part of why the VIX is so low proper now.
Let’s check out the portfolio.
What To Do Subsequent?
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Editor, POWR Shares Below $10 Publication
SPY shares rose $0.19 (+0.04%) in after-hours buying and selling Friday. 12 months-to-date, SPY has gained 12.84%, versus a % rise within the benchmark S&P 500 index throughout the identical interval.
Concerning the Creator: Jay Soloff
Jay is the lead Choices Portfolio Supervisor at Buyers Alley. He’s the editor of Choices Flooring Dealer PRO, an funding advisory bringing you skilled choices buying and selling methods. Jay was previously knowledgeable choices market maker on the ground of the CBOE and has been buying and selling choices for over 20 years.
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