Last week we suggested to hedge your portfolio for the week. The market tanked on Tuesday and then rebounded strongly on Thursday. Overall the market was flat. Based on last week we do not see any reason to suggest another down week. With the turmoil in the Middle East and possible protests in Saudi Arabia next week, however, anything is possible. Either, we examine the model results and invest based on the model.
When there is a major move in our indicators we hedge our portfolio for the week. Our measures did not move much over the last week. This signals that the probability of a down week is low. However, the type of movement seen in measures in the week before signals something down the road in 4-6 weeks. Therefore, we remain cautious.
Our portfolio is based on three trades.
First, high yield investments. These investments include US high yield corporate, REITs, and emerging market debt.
Second, natural resource and energy plays including markets such as Canada and Russia, energy, silver, and gold.
Third, betting on certain markets are undervalued such as Japan and Australia.
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