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Looking at one of the key risk management relationships we’ve been working with in calling for this 6% correction (the inverse relationship between the SP500 and the VIX), we’re at a spot here today that I would consider a Short Covering Opportunity. 

  1. The SP500 is immediate-term TRADE oversold
  2. The VIX is immediate-term TRADE overbought 

That should not be mistaken for a “buying opportunity” on the long side. At least not in terms of ramping gross long exposure aggressively. Not yet. What I see for the immediate-term TRADE is a Short Covering Opportunity in oversold positions (book gains) and a modest asset allocation to US and German Equities.

In the Hedgeye Portfolio these are the moves I’ve made into the market close: 

  1. Covered short position in SPAIN (EWP)
  2. Covered short position in EMERGING MARKETS (EEM)
  3. Covered short position in WALMART (WMT)
  4. Covered short position in INDUSTRIALS (XLI)
  5. Bought long positions in HEALTHCARE (XLV)
  6. Added to long position in GERMANY (EWG) 

Let me know if you have any questions. All of these moves tick live with time stamps on our site at Hedgeye.com.

KM

Keith R. McCullough
Chief Executive Officer

Short Covering Opportunity - 1