I am happy with how the portfolio has formed up over the past couple weeks. Of our 8 present positions, 6 are winners, one is breaking even, and one is a small loser. A number of of the shares have been in an uptrend as properly. In the intervening time, we will (probably) give attention to smaller modifications reminiscent of trimming or including to positions. We’re at about 70% allocation of our money, which I believe is cheap on this surroundings. Issues can change in a rush after all, however I am content material with the combo of shares we’ve got within the portfolio right now. Let’s check out what is going on on within the S&P 500 (SPY) week. Learn on for extra….
(Please take pleasure in this up to date model of my weekly commentary initially revealed June 8th within the POWR Shares Beneath $10 e-newsletter).
Market volatility has actually come crashing down for the reason that debt ceiling scare ended with hardly a whimper. We’re seemingly experiencing the summer season buying and selling doldrums, the place not a lot occurs within the inventory market from a macro perspective.
You’ll be able to see within the chart above, the SPX (S&P 500 index) has breached the two-standard deviation higher barrier.
That doesn’t essentially imply shares are going to unload because the bands are fairly slender resulting from a decrease volatility surroundings. Nonetheless, imply reversion is a positively chance within the coming days (simply as a result of legislation of averages).
Whether or not the market stays on this low volatility surroundings will principally be decided by what the Fed says and does on the June and July FOMC conferences.
Now we have the June assembly coming subsequent week after which it gained’t be a shock to see an entire lot of nothing within the markets till after Independence Day.
The market continues to foretell a pause in price hikes for June. The futures market reveals a 72.5% likelihood of the Fed doing nothing to charges subsequent week.
Financial knowledge has been blended to the purpose the place the Fed can probably justify not rising charges (instantly). After all, they’ll accomplish a few of their objectives by jawboning (e.g. speaking down the market).
In July, futures are displaying a roughly 65% likelihood of a price enhance. That tracks with the mainstream narrative.
It has turn out to be obvious that the Fed isn’t achieved elevating charges. Nonetheless, at this stage, they aren’t in as a lot of a rush to hike.
Transferring on to grease, West Texas crude has been a bit unstable recently. Saudi Arabia introduced manufacturing cuts, and the value of crude briefly spiked. Nonetheless, it’s come again all the way down to round $70 per barrel.
Control oil because it might be a number one indicator for the economic system (and thus, shares). A worth too excessive or too low is usually not good for shares (for various causes). Nonetheless, the place we are actually when it comes to worth is just about a non-factor.
As talked about earlier, volatility, as seen within the VIX chart under, has come crashing down in latest days. The value is now firmly under 15, which is usually thought of a low-volatility regime.
Whereas we may see a short-term spike based mostly on the information cycle or the Fed, I anticipate volatility to stay comparatively low.
The summer season months are usually slower when it comes to realized volatility (the precise motion of shares). Thus, implied volatility (ahead wanting) tends to return down as properly. That’s no less than a part of why the VIX is so low proper now.
Let’s check out the portfolio.
What To Do Subsequent?
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Chief Progress Strategist, StockNews
Editor, POWR Shares Beneath $10 Publication
SPY shares rose $0.19 (+0.04%) in after-hours buying and selling Friday. 12 months-to-date, SPY has gained 12.84%, versus a % rise within the benchmark S&P 500 index throughout the identical interval.
In regards to the Creator: Jay Soloff
Jay is the lead Choices Portfolio Supervisor at Traders Alley. He’s the editor of Choices Flooring Dealer PRO, an funding advisory bringing you skilled choices buying and selling methods. Jay was previously an expert choices market maker on the ground of the CBOE and has been buying and selling choices for over 20 years.
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