TFMkts – New Trade Idea and Fixed Income Allocation Adjustment

Buy SPX and take HY “fixed income allocation” from 10% to 20%. HYG 89.35 and SPX 1379.

We took HYG down early last week from a 15% ideal to 10%. Now up to 20%. We have seen a decent move and were waiting for this opportunity to nibble and add more risk/yield. This is also a good offset against the continued Spanish short, and on any bounce will allow us to set the Italian CDS short at a better level than we can get today in a down tape with Europe closed.

On SPX, this makes us long, but think that NFP was bad, and we will get more weak data, the spin will be hard and aggressive the rest of the day, and any remaining shorts will want to cover some (like we did on Friday morning) and some buy the dip crowd will be tempted now that we are much closer to the 50 DMA, RSI is not overbought, and the move has been big, and some will argue that we are at another support level.