Stock market indexes are reaching a point they should find some buying interest if it exists. We’ll soon find out if they can hold the line, or see more selling pressure…

My short term momentum indicators are reaching oversold at the same time the S&P 500 is testing the support area in green above as well as the 200 day moving average.

At the same time, the Long Term Treasury ETF is pushing on its upper band and becoming more likely to reverse back down within its average range. I sold a position for a small profit in TLT that was short term hedge.

My other hedges, which are much more asymmetric than TLT, remain in place to hedge off some market risk until the selling pressure seems to be drying up. My hedging isn’t necessarily intended to result in a profit if the stock market falls, but instead of offset losses in other positions we want to continue to hold. Although sometimes the payoff in the hedge is large enough I realize the profit while it’s there. However, if I took profits too soon every time we wouldn’t have the exposure for hedging purposes in larger waterfall declines. At this point, we have open profits in our remaining hedges.

We’ll see how it all unfolds…

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

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