Should we reduce SDS? Watch SPY resistance

Usually I don't send trade alerts like this, but this time is different. As you know we hold 1/3 of our portfolio in SDS for hedging. This week we were in line with S&P and even slightly worse some days. This is because of excessive SDS protection. We have good winners this week, we sell them, realize gain, but % of SDS holding is getting relatively bigger. I was hoping to reduce SDS on the way down which has not (yet) happened. Market goes up, on low volume, etc, but goes UP and UP. I am not going to argue with that. Market knows better.

 

So, my point is that if we break above $108 for SPY it would be a signal to reduce SDS by 1/2 at least. We will realize some loss, but that's how hedging works. Again, I doubt we see break above $108, but if it comes, stop loss limit for SDS is when SPY is above $108.06 +0.33% (roughly $108.50). Until that we hold SDS and sell it at least 1/3 when and if SPY hits $102.50, or sooner, but we will have further alerts for market down move. More important is to watch move up and keep this $108.50 SPY border line in mind.