EU Could Weight on this Latest S&P Bounce

This was an impressive day with the S&P 500 ($SPX) finishing up 1.25 percent and retracing the pullback of the previous session. Volatility ($VIX) scaled back finishing at $19.31, down 8.57 percent.

I did scale out of 30 percent of my volatility position yesterday. I had orders filled today, using some of the profits from the $VIX exposure into equities from my Tradespoon Scoop Conviction List. Some of those names may be familiar to you: Domino’s Pizza ($DPZ), Foot Locker ($FL), and Duke Energy ($DUK).

With Domino’s and Foot Locker, I wrote some calls against the positions that I previously established. Both stocks have spiked Volatility in January and this mitigates my long entry price. I only bought 25 percent of my total allocation to these names because I have some reservations for the potential of a “V” shape recovery from this most recent pullback.

The biggest reason I say that is because of the growing divergence between US equity market strength and EU equity market weakness. Unless the EU ($EZU) can base and start to grind to the upside, it will be hard for US domestic markets to continue the upside challenge we saw today.

I will add Volatility exposure to my portfolio if $VIX dips back into $17-$15 levels. I will add more equity exposure in quality names with price pullbacks, or with bullish volatility strategies that take advantage of high implied volatility for bullish sentiments.