17 Mile 2.0 Strategy Note 5

17 Mile 2.0

Strategy Note 5

August 3, 2017


DISCUSSION

As the S&P 500 continues to hang out near ATHs, underlying breadth continues to deteriorate. I was looking for one more FOMO 1-2% rip to put on the remaining SPY hedge, but my conviction in that path has fallen alongside market breadth. While more than likely not even close to the violent magnitude of the August 2015 sell-off, the negatively diverging breadth set-up is similar. And market sentiment – as represented by the S&P 500 DSI – is due for a trip to sub-40, if not sub-20 territory. I very well could be wrong, but the evidence continues to pile up in favor of the market’s first 5-10% correction in months.

S&P 500 DSI

S&P 500 Breadth

Summation

PORTFOLIO POSITIONING

In response to the above, this afternoon I put on the bulk of the remaining SPY short, leaving just over 9% of capital left to add in the event the market sees one more gag rally. After the move, positioning looks as follows:

  • Longs: 71%
  • Net Cash & Equivalents: 29% (including SNI)
  • SPY Hedge: 91%
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