It feels like now is the moment to think about hedging my stock portfolio with a short selling position against the S&P 500 broad market indicator. Speculative risks are growing as the investing crowd continues to assess July consumer inflation data in the United States. Further signs of price pressure easing has not been interpreted as an additional reason for the Federal Reserve to extend its interest rate pause. The point is that some dipper examination of the data may flag another 0.2% of monthly increase in core services prices excluding housing sector. And this is considered to be one of the most closely monitored inflation aspects by the U.S. regulator.
Worries over financial stability increased after Moody's downgraded the ratings of 10 American banks and placed six banks including U.S. Bancorp and State Street on review for possible downgrades in the future. The context led the benchmark 10-year U.S. Treasury bond yields higher again to the levels above 4.1%. The S&P 500 Trust ETF (SPY) is almost a copy of the S&P 500 performance. SPY closed two consecutive trading sessions on August 9-10 just in a step from its 445 technical support. That was a sign of rising bearish pressure. If so, then selling SPY looks as a reasonable move in the light of the U.S. producer price data release today and in an attempt to generate some profit from the current downside momentum on Wall Street indexes, as to balance portfolio risks. Technically, stop loss order is needed to be placed by 4% or 5% above the 459.43 local high of July 27, which may help in case of resumption of the year-to-date uptrend.
