POSITIONS: Long Utilities (XLU), Short Industrials (XLI)
What a rip that was. Our old friend Squeezy The Short Seller’s Shark has returned.
This week was the 2nd up week out of the last 4 for the SP500. That puts it down for 6 of the last 8. So what to do with that? Embrace being Duration Agnostic. In Hedgeye speak, we’ll call this market Bullish TRADE and Bearish TAIL.
- TAIL (long-term) resistance = 1265
- TRADE (immediate-term) resistance = 1220
- TRADE support = 1182
In the end, the TAIL trumps the TRADE (that’s why we still have a big Cash position). But that doesn’t mean that in the right now that the TRADE can’t impact your returns. So the way I think about this from both a gross and net exposure positioning perspective is simple.
- If the TRADE line of 1182 holds, I’m ok with expanding my gross and my net exposures on weakness
- If the TAIL line of 1265 holds, I’m ok with selling down gross exposure and tightening my net on rallies to TRADE line resistance
That’s exactly what I did today. The best I can do from a net exposure perspective is use my LONGS minus SHORTS in the Hedgeye Portfolio as a hybrid way to express my risk management view in real-time. I realize that’s far from perfect, but I’m trying to communicate the general idea.
At this time yesterday, I had 14 LONGS and 7 SHORTS. Into this morning’s Squeezy covering to 1219, I moved back to 11 LONGS and 8 SHORTS.
Enjoy your weekend,
Keith R. McCullough
Chief Executive Officer