The US markets continued their march (much) higher since our last updates so that both SP500 and Nasdaq 100 broke their resistance levels discussed on January 17th and 19th posts . SP500 (See 1st chart below) surpassed the 2275 point which acted as support thereafter and early february the 2320 was also broken which as expected “..move above 2320 would be very bullish.” accelerated the move to above 2350. The US markets are overbought and could even become more overbought with this very strong trend in place. A correction will come but nobody dares to call an end for the current move and knows what will be the trigger for it. Action on Nasdaq 100 (See second chart below) was even more spectacular with a 5%+ up move after crossing levels mentionned in January 17h post. Technologies are deeply overbought on a daily basis but the RSI on weekly chart testifies of another 2 to 4 % upside potential is not excluded . I would definitely not chase this segment of the market at this stage but keep our current 15% IT exposure in our strategic (Long term) exposure . This is matching the proportion of IT stocks in the FTSE All World index. Our portfolios strategic allocation is overweighted in Healthcare (16% vs 10%), Materials (15% vs 7%) and Industrials (15% vs 10%) and underweighted in Financials and Consumer Staples.
Virt. Portfolio : The two 1% of portfolio hedges taken on SP500 and NDX 100 expired worthless as their strike levels were surpassed … this is how this kind of put “insurance” works : if the underlying asset (here SP500 and Nasdaq ) continues higher from the time one takes the position , one profits from underlying positions positive move and loses from position itself . If underlying asset loses in value , result can be 2 , 5 or 10, .. times the committed amount depending of market move size and leverage of position taken .
My Balanced allocation model portfolio (50% Max Equities) is up 1,95% YTD : Equities (out of hedges) contributes positively to performance by 2,55%, bonds by 0,33% and hedges negatively by around 0,90%.