Is much awaited correction finally here?

For weeks now, I have made a decision to sell in May. I've been correctly positioned for this rally and capitalized on it pushing the beta and the alpha, while still maintaining my sell discipline. So after 6+ weeks of pushing the envelope and pressing my bets, I've become a lot more cautious. During the past week or two, I have been getting more and more defensive, selling some extended stocks, after my trailing stops got hit, trading more pairs, and selling covered calls. The idea was to drastically reduce my equity exposure (which has increased from roughly 30% to over 50%)by the end of May.

Currently, I am seeing more red flags of an impending correction, than during the May Day parade in Moscow. More on that in my next post. I would be surprised and frankly, disappointed if we don’t get a pullback soon, as I would consider it not only healthy, but also an opportunity to finally end the debate whether this is a bull or a bear market rally.

So, after a few days of tag of war, it looks like the fear is winning today. As I am writing this, we finally broke below 890 on SPX, the first line of defense. The next support to watch is 875. An ideal pullback would be around 10% or so, from the recent high of 930, roughly down to 825, where we also have a pretty good technical support. I still believe the odds favor that we have put in a bottom in March, but we may get to test my theory soon.

In my next post, I will discuss some of the reasons my gut is telling me to duck.