The U.S. stock indexes declined -6.84% for the large-cap S&500, -11% for mid caps, and about -19% for small-cap stocks mostly in the single month of May.
Since June 1st, however, these same stock indexes have started to trend back up.
Over the past 3 months, momentum has turned negative for the stock indexes.
My strategy was to hedge off some of this downside risk. I then removed my hedges for a profit. It doesn’t always work out that way. A hedge position isn’t necessarily intended to be profitable through the entry and exit, but instead, the objective is to hedge off some of the downsides of long positions. Sometimes I hold them too long and lose their gains, other times I exit and realize a profit, and then there are times I exit them too soon with a profit but miss an even large profit. It ain’t perfect, nor does it need to be, and I’m okay with it.
My stock market observation yesterday, which I shared on Twitter, was:
This double bottom could be a likely short-term low if the
#SPX $SPY holds the line… my guess is it’s more likely than not. If it breaks down further from here, though, it probably gets ugly like when it didn’t hold last December…
So far, so good… as marked with a simple trend line.
A week ago the AAII Sentiment Survey showed an unusually high level of Pessimism and optimism at an unusually low level… signals to stalk the market for good risk/reward setups on the buy side.
I exited my hedges a few days ago and increase my exposure to stocks. However, I did this at the same time my momentum and systematic trend following systems shifted from stocks to bonds or cash. So, my entries are based on signals from my countertrend and high-income yield systems. As prices fall in high yielding ETFs, their dividend yield increases.
Global X SuperDividend™ US ETF (DIV) is an interesting example. This is not investment advice for anyone to buy this ETF as I only provide advice and portfolio management to clients via an executed contract. It is useless to know what I would buy if you don’t know how much I would buy and when I would sell. With that said, the chart of Global X SuperDividend™ US ETF (DIV) shows as the price (blue line) declined to a double bottom, the dividend yield has increased to 7.6%. So, if I entered it here, it would be expected to yield 7.6% going forward. I am only using this for informational purposes, so I’m not including all the variables and risks it may not which can be found here.
The point is, you can see how as price falls in a high yielding asset, it’s yield rises.
I have recently made my ASYMMETRY® High Income Yield Portfolio available to clients who seek high income from their portfolio and are willing to accept fluctuation in the balance. Up until now, I had been testing this strategy with my own capital. The portfolio focuses on asymmetric risk/reward opportunities for high-income yield and also adds an asymmetric hedging system to help with downside risk management. For more information on the strategy, contact me.
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 exclusively 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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