Putting my short-term technical analysis tactician hat on and hedging off equity risk

I’m dialing in to look at shorter-term technical analysis as my risk management systems are suggesting a risk of a stock market decline is becoming elevated.

tactician technical analysis analyst tactical manager trader

Zooming in to shorter time frames, the U.S. stock market advance appears to be becoming exhausted.

The chart below is the SPDR® S&P® 500 ETF, yesterday on a 5-minute chart. Now that’s zooming in! I’m not a day trader, but I’m monitoring the trend for signs of buying exhaustion and/or selling pressure to potentially take over. Yesterday this index ETF was up nearly .75% in the morning, then you can see it drifted down to close well below its VWAP for the day.


The next chart shows the SPY trend going back for about six months. The recent stock advance has been impressive and I’m sure glad we participated in it, but I’m now applying some situational awareness. The strong momentum since the late December 2018 low could be becoming exhausted and may find some resistance for higher prices, at least temporarily.


As a tactician, since we had heavy exposure to stocks, I’ve been gradually reducing exposure and today started hedged off some equity risk to offset some of my market risks. I did that as opposed to taking large profits and realizing taxable gains. Fortunately, we took advantage of last years volaltity and made the best of it by executing significant tax loss harvesting. This time I decided to hedge some of our gains rather than realize them.

I may be wrong, but my risk management systems are elevated for at least a short term exhaustion, so I expect we’ll see some selling pressure overwhelm buying at some point from here. If it doesn’t, then it’s a good sign the momentum may be here to stay a while, but I’ll probably still wait for a reversal down to add more exposure in my tactically managed portfolio. My objective is asymmetric risk/reward, and from this starting point, I see more potential for downside than upside for stocks. My systems aren’t always right, but the magnitude of the gains are larger than the losses when it’s wrong. I call it ASYMMETRY®.


Mike Shell is the Founder and Chief Investment Officer of Shell Capital Management, LLC, and the portfolio manager of ASYMMETRY® Global Tactical.

Mike Shell and Shell Capital Management, LLC is a registered investment advisor and provides investment advice and portfolio management solely to clients with a signed and executed investment management agreement. The observations shared on this website are for general information only and are not specific advice, research, or buy or sell recommendations for any individual. Investing involves risk including the potential loss of principal an investor must be willing to bear. Past performance is no guarantee of future results. All information provided is deemed reliable, but is not guaranteed and should be independently verified. The presence of this website on the Internet shall in no direct or indirect way raise an implication that Shell Capital Management, LLC is offering to sell or soliciting to sell advisory services to residents of any state in which the firm is not registered as an investment advisor. Use of this website is subject to its terms and conditions.

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