It would seem that our 2% weight in (SH) Short S&P 500 was a bit premature. As noted earlier, we took a small position with room to move up. Our current position is down 1.4%. The S&P 500 (non-total return) is up 10.35% YTD.
Here is the the crux of the situation. Has the market rallied too much before earnings season? From all we can gather, everyone expects earnings to be excellent and propel the market forward. Said another way, earnings will be great and the market will be perceived as cheap. Also, the market seems to be baking in further interest rates, which deviates from the credit markets view.
Should the market continue to rally another 1%-2%, we will add another 3% to (SH) Short S&P 500 Position. We are looking to a small sell off after earnings with a rally toward late December.