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 interim, we will (seemingly) give attention to smaller adjustments comparable to trimming or including to positions. We’re at about 70% allocation of our money, which I feel is cheap on this atmosphere. Issues can change in a rush after all, however I am content material with the combo of shares we now have within the portfolio at the moment. Let’s check out what is going on on within the S&P 500 (SPY) week. Learn on for extra….
(Please get pleasure from this up to date model of my weekly commentary initially printed June 8th within the POWR Shares Below $10 publication).
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 may 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 dump because the bands are fairly slender on account of a decrease volatility atmosphere. Nonetheless, imply reversion is a positively risk within the coming days (simply because of the legislation of averages).
Whether or not the market stays on this low volatility atmosphere 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 received’t be a shock to see a complete lot of nothing within the markets till after Independence Day.
The market continues to foretell a pause in fee hikes for June. The futures market reveals a 72.5% probability of the Fed doing nothing to charges subsequent week.
Financial information has been blended to the purpose the place the Fed can seemingly justify not rising charges (straight). In fact, they’ll accomplish a few of their targets by jawboning (e.g. speaking down the market).
In July, futures are displaying a roughly 65% probability of a fee improve. That tracks with the mainstream narrative.
It has change into obvious that the Fed isn’t completed 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 these days. 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.
Keep watch over oil because it may very well be a number one indicator for the financial system (and thus, shares). A value too excessive or too low is mostly not good for shares (for various causes). Nonetheless, the place we at the moment are when it comes to value is just about a non-factor.
As talked about earlier, volatility, as seen within the VIX chart under, has come crashing down in current days. The worth is now firmly under 15, which is usually thought of a low-volatility regime.
Whereas we may see a short-term spike primarily based 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 come back down as properly. That’s not less than a part of why the VIX is so low proper now.
Let’s check out the portfolio.
What To Do Subsequent?
The above commentary will make it easier to recognize the place the market goes. However if you wish to know the perfect shares to purchase now, then please take a look at my new particular report:
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All of the Greatest!
Jay Soloff
Chief Development Strategist, StockNews
Editor, POWR Shares Below $10 E-newsletter
SPY shares rose $0.19 (+0.04%) in after-hours buying and selling Friday. Yr-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 Buyers 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 twenty years.
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