Morning Update for June 1

The pre-market activity suggests a nasty gap down. For the core ETFs we have been using, a break below Friday's low is a trigger to add to the position. The last trigger to complete the position is below $104.50

Any trade from last night is still valid, except I'd watch the longs carefully. The shorts that gap below the trigger are fine, just enter them. There's always a chance that the market will try to fill the gap, in which case you get better short positioning. There's a smaller chance that it will continue rising to close higher for the day. The most likely probability is that it just keeps heading lower. this is why you want some part of the position established. You might want to save a part for a possible bounce, that's the trade-off you take-wait for higher prices and maybe miss the move, or go all in now and see the gap filled and miss the opportunity to get better positioning. This is why I say the best is probably to establish 50% or more on the open/or at the trigger and leave a little room for a bounce to add more.

Below $104.50 (I always refer to the SPY) we want to have the core short portfolio near 100% short, but remember-that 100% is 100% of 75% of portfolio. We are leaving 25% in cash.

It seems to be a very bearish environment, this is exactly why I'm cautious, what is obvious is typically obviously wrong, although I am bearish on the market, it's just short term market tactics and volatility right now. However, you must act with the information you have now and not try to guess the market direction or behavior, so we are going to go to 75% short today, most on the open and leave a little for a bounce.

Good luck.