The S&P 500 gave up 2.43% Monday to close under the 9 day MA (red line). As I?m writing the index is a full 38 points off its record high, made just last week. What was the floor could now become the ceiling as I see the 9 day MA as the major pivot point.
On the downside, the next hurdle is the 50 day MA (dark blue line) now about 25 points under current trade. I think it?ll give way and I?m speculating that in the coming weeks we see a 38.2% Fibonacci retracement that drags June futures fully down to 1490.?
I throw a flag in the air for investors who are carrying sizable profits in stock portfolios. It?s remarkable, really, after a first quarter that pushed the S&P 500 about 8.5% higher. Most investors would be content making that yield in a full calendar year!
Of course, even as we thirst for returns? I?ve learned that figuring out how to keep hard-earned money is just as important as making it in the first place. I?ve suggested before, long stock portfolios should seriously consider hedging a meaningful portion of it with short exposure. If the correction does not happen you simply spent 3-7% of your portfolio?s assets on insurance and avoided any potential calamity.
I?ve also advised clients in recent weeks to gain outright bearish exposure via futures, along with selling calls and buying puts. There is no ?one size fits all? strategy, but rest assured? you?ll want some protection in the weeks ahead as the better days of this rally seem to be behind it.