UPDATE: On July 29 we started trading the short side of the market. At that time the S&P 500 Index had the highest price spread in history above the 200 day moving average. All technical indicators were showing overbought conditions. As earnings season ended, we felt the time was right for profit taking. At that time in our equity accounts, we recently raised cash to 20 percent and added a 4% weighting of the S&P 500 double down ETF fund to our portfolios. We were predicting a -5%, -7% or -9% corrective move in the markets.
Last week the markets started to sell off and we maintained our 20% cash weighting but increased our short position in the S&P 500 double down ETF fund to 8% and added a 4% short position in the NASDAQ double down ETF fund, giving us a 20% cash position and a 12% short position in the accounts. We are attempting to lock in our profits (gains) in the portfolio while reducing volatility (portfolio exposure) during this pull back in the markets. When we see signs of the market finding a new base we will remove our short position and then look to reallocate cash to positions that show upside promise.
With that said we remain committed to our forecast of a corrective move down of -9% followed by a strong 4th quarter rally to possible new highs by year end.