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Christian Hviid
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An Investment strategist with multi-billion dollar portfolio management experience managing active Absolute and Relative oriented strategies in Unified Managed Account and Separate Account settings. Cross functional expertise covering asset allocation, risk management, manager and investment due... More
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Point Guard Capital LLC
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  • S&P 500 Technicals Breaking 1 comment
    Oct 19, 2012 2:41 PM | about stocks: SPY

    The market was vulnerable to a down move given moderating expectations from a fundamental perspective prior to earnings season kicking in. Technicals may be suggesting that the market has further downside risk mainly due to:

    I. Triple top formation

    II. Breaking under 50-DMAs

    III. Weakening fundamentals from an earnings expectation standpoint

    The S&P 500 faces some support at 1425. The next support may be close to 1400 if not the 200-DMA at around 1374. This could spell a 4% sell off if risk off sets in.

    (click to enlarge)

    Risk mitigation may be in order as expectations get ratcheted down, risk aversion effects on multiples may add further contraction bias with an overall effect of lower stock prices in the very near term.

    An active risk management approach is warranted and convex payoff structures are desirable in this environment.

    Disclosure: I am long SPXU, VXX.

    Additional disclosure: For absolute return portfolio, I have a tactical Beta-Hedge against mostly active exposures utilizing SPXU and an additional tactical hedge using VXX. I may remove or add to these at any time and without prior notice.

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  • Christian Hviid
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    Comments (9) | Send Message
     
    Author’s reply » UPDATE: As of today's preliminary close - S&P 500 is lower since the above post and has now closed below its 200-DMA (1377.51 < 1380.71). The VXX position was closed on 10/24/12 @ 37.442 employing a trailing stop order and the SPXU position was trimmed by 10% on 11/6/12 to size hedge appropriately and be tactical. Some tactical option monetization strategies around SPXU were employed between 10/24/12 and 11/6/12). Monetization and dividend/interest proceeds were reinvested in Thematic, Fundamental and Arbitrage exposures. As of this posting still maintaining some of the initial Beta-Hedges for absolute return portfolio albeit 90% of initial hedging position. Will assess environment to actively manage long positions as well as hedges.
    8 Nov 2012, 04:31 PM Reply Like
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