Editors Note:

When you own something valuable, you buy insurance. We are overly long in the portfolio with only one short position and the VIX calls. After looking at the chart setup this weekend I think we need to buy some more insurance.


No New Bullish Plays


SPY - S&P-500 SPDR ETF - ETF Profile

The SPDR S&P 500 trust is an exchange-traded fund which trades on the NYSE Arca under the symbol. SPDR is an acronym for the Standard & Poor's Depositary Receipts, the former name of the ETF. It is designed to track the S&P 500 stock market index.

The S&P-500 is in danger of a material drop, possibly to 2,250 or the equivalent 225 level on the SPY ETF. The chart is unsupported and we are entering into a typically volatile period of the year over the next five weeks. I am recommending we buy insurance with a put on the SPY only IF the SPY trades at a new five-week low of 232.75. That way if the market opens higher on Monday we can watch to see if that direction holds before putting money at risk.

I believe if the market goes lower next week it could be the beginning of a major decline.

With a SPY trade at 232.75

Buy May $230 put, currently $2.68, initial stop loss $238.25.