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Just Sold Your Bond Funds? Consider QSPNX And Its Low Volatility Twin

Alternatives can provide superior risk-adjusted returns, less volatility, and proven downside protection. AQR Premia Style Alternative N Fund and AQR Premia Style Alternative Low Volatility N Fund. Integrating these two style premia alternative funds into your portfolio. Surfing beach near Tofino, B.C. Ⓒ Sandy Cliff Research Alternative funds come in many shapes and sizes these days. In the past six years, they have flooded the market. Why? Because, if structured properly, they can provide superior risk-adjusted returns and less volatility. As Vanguard pointed out in its August 2014 white paper Liquid alts: a better mousetrap? these new strategies “constitute a new industry with explosive growth. More than 70% of their cash flows and 68% of new product launches have come since 2009; 50% of these flows and products have come just in the three years through 2013.” For a detailed listing of alternative funds launched just last year, see DailyAlts.com New Funds listing . Long-short, market-neutral, style premia, managed futures, and multialternative are some examples of these offerings. Financial advisors are now recommending these types of investments to replace varying percentages of equities and bonds in a traditional portfolio. The AQR Style Premia Alternative Fund ( QSPNX ) and AQR Style Premia Alternative LV Fund ( QSLNX ): AQR Capital Management: AQR Funds started out as a hedge fund shop in 1998 and entered the mutual fund business in 2009 in order to make its strategies available to a wider range of investors. Quantitative research forms the basis for all of the firm’s strategies. The firm has an academic bent with many of its principals and associates holding Ph.Ds. Fund managers and associates continue to research and refine the methodologies used in their funds. Results of their findings are often published in academic journals and can be found at AQR.com . Additional information on the two Premia funds discussed below as well as other AQR funds can be found at funds.AQR.com Fund Classes and Purchase Information: The details offered for these two funds refer to the N share class. Both N and I share classes are available from Fidelity with a minimum purchase of $1,000,000 for the N class and a minimum of $5,000,000 for the I class. However, initial minimum investments of these funds into “group retirement accounts such as Fidelity Simplified Employee Pension-IRA, Keogh, Self-Employed 401(k), and Non-Fidelity Prototype Retirement accounts are $500 or higher. Additional investments into Regular, IRA, and Group accounts are $250 or higher.” I was able to buy both QSPNX and QSLNX for my Fidelity retirement IRA for a minimum purchase of $2,500. AQR funds, according to the Morningstar entry for each of these funds, can also be purchased at over a dozen U.S. other financial forms including Vanguard, Schwab, etc. Important note: All share classes of the AQR Style Premia Alternative Fund and the AQR Style Premia Alternative LV Fund will close to new investors effective at the close of business on January 29, 2016. In November 2015, AQR stated that these two funds were closing due to “capacity constraints associated with the investment strategy employed by these Funds.” However, prior to this announcement, AQR filed with the SEC for approval for a new AQR Style Premia Alternative Fund II. There is no word as yet on date launch, expenses or any details on whether a low volatility version of this will be launched as well. Investing Style: The Style Premia Alternative and the Style Premia Alternative LV invest long and short across six different asset groups: stocks of major developed markets – approximately fourteen hundred stocks (for QSLNX and up to 1800 stocks for QSPNX) across major markets equity indices – twenty-one equity indexes from developed and emerging markets fixed income – bond futures across six markets; short-term interest rate futures in four markets currencies – twenty-two currencies in developed and emerging markets commodities – eight commodity futures Management employs long-short strategies across all of these asset groups based on four investment styles: value – the tendency for relatively cheap assets to outperform relatively expensive ones momentum – the tendency for an asset’s recent relative performance to continue in the future carry – the tendency for higher-yielding assets to provide higher returns than lower-yielding assets defensive – the tendency for lower-risk and higher-quality assets to generate higher risk-adjusted returns Management since inception: Andrea Frazzini, Ph.D., M.S.; Jacques A. Friedman, M.S.; Ronen Israel, M.A.; Michael Katz, Ph.D., A.M. oversee both funds. Details specific to QSPNX: Opened on 10/31/13. 2015 Return: 11.08%. 2015 Return: 8.50%. Expenses: 1.75%. Annualized volatility target level: 10% (with a range of 8-12%). Fund size: $1.7 billion. The listed % of risk allocation is: Global Stock Selection 33.7% Equity Markets 18.8% Fixed Income 16.5% Commodities 16.2% Currencies 14.7% Number of long holdings 969; number of short holdings 732. Details specific to QSLNX: Opened on 9/17/14. Year 2015 Return: 3.85%. Expenses: 1.10%. Annualized volatility target level: 5% (similar to the historical volatility of intermediate-term government bonds; typical range between 3% and 7%). Fund size: $185.2 million. Percent of risk allocation is: Global Stock Selection 33.2% Equity Markets 20.3% Fixed Income 17.3% Currencies 15.9% Commodities 13.4% Number of long holdings 864; number of short holdings 659. Integrating These Two Style Premia Alternative Funds Into A Portfolio: The alternatives landscape is littered with suggestions for adding alternatives to a portfolio, but the deciding factors are simply the individual investor’s risk tolerance, including a risk of buying an alternative fund with a short track record, and the individual’s investment timeline. I view these two Style Premia funds as alternatives to bonds within my IRA retirement portfolio. Because of tax implications, they are best held in an IRA or similar account. I have also recently added a market neutral and an equity long-short fund to my allocation. The Vanguard Managed Payout Fund (MUTF: VPGDX ) makes use of stocks, bonds, alternatives, including the Vanguard Market Neutral Fund (MUTF: VMNFX ). It has a mix that is worth considering as a foundation if you are thinking about adding alternatives to your portfolio mix. Here is a listing of its current holdings: Vanguard Total Stock Market Index Fund 20.1% Vanguard Total International Stock Index Fund 19.7% Vanguard Global Minimum Volatility Fund 15.1% Vanguard Total Bond Market II Index Fund 12.0% Vanguard Alternative Strategies Fund 10.4% Vanguard Market Neutral Fund Investor Shares 7.0% Vanguard Total International Bond Index Fund 5.8% Commodities 5.0% Vanguard Emerging Markets Stock Index Fund 4.9 For further information on alternatives you might want to check out: Brian Haskin, “Retiring Baby Boomers to Continue Liquid Alts Boom?” at DailyAlts.com which gives a good summary of and access to the PDF of “Liquid Alternatives: The Next Wave in Asset Allocation” by Matthew Glaser, Managing Director and Portfolio Manager/Analyst at Lazard Asset Management.

U.S. Small Caps: Smoke And Mirrors

Summary The aim of this quick study is to check whether the well-known outperformance of US small caps over US large caps: Is true? Is persistent with respect to market timing? Is persistent with respect to internal selectivity within the index? Every investor – rookie or experience – already would have heard about the well-known, small caps’ outperformance. The topic is not as simple as it seems to be. It has to be followed very cautiously. This article is an attempt to give readers some major keys, enabling them to avoid expensive mistakes. This study relies on two indices: – S&P 500 Total Return – Russell 2000 Total Return Database stands between December 31, 1998 and December 22, 2015. Persistent with Market Timing? We can notice that an investor who checked their performance at the end of each year, and who had kept their equity position until December 22, 2015 would have noticed an outperformance of S&P 500 versus Russell 2000 no matter they had invested at the end of 2004, 2005, 2006, 2007…or 2014. This outperformance varies between 1.7% (investment at the end of 2007) and 24.9% (investment at the end of 2010). Therefore, the post 2008 rally in equities was clearly driven by large caps (here through S&P 500) over small caps (here through Russell 2000). In the table below, the outperformance of large caps is exhibited in the bottom right. Everywhere else in the table, and whatever be the holding period, the Russell 2000 has posted a better performance than the S&P 500. The only period in which we notice a similar outperformance by the S&P 500 was during the equity market crash in 2007-2008 as large caps were being considered safer than small caps – a case of clear defensive reaction. The rally that followed enabled the US equity markets to rise by 162.3% for the S&P 500 since December 31, 2008 and by 150.5% for Russell 2000 since December 31, 2008. Please note that between December 31, 2010 and December 22, 2015, the S&P 500 rose by 80.2% whereas Russell 2000 posted ‘only’ a 55.3% growth. There is one explanation for this: the market has changed, with the increase in ETF investing, smart-beta and systematic strategies. (click to enlarge) Source: Author’s own The 15.9% number in the table shows the difference between S&P 500 Total Return and Russell 2000 Total Return between December 31, 2010 and December 22, 2014. From the table we can infer that until 2010, the Russell 2000 has been outperforming the S&P 500 regularly, except in 2007-2008, where the ‘washout’ was much more important for small caps than for large caps. It seems that since 2010, investor behavior has changed with a big shift towards ETFs and smart-beta, risk premia solutions, focusing on large caps and low-volatility assets (Minimum Variance method, Equal Risk Contribution). Persistent with Internal Selectivity Within the Index – Actuarial and Total Return We check the composition of each index at the last day of year Y-1, and assume the composition remains stable over year Y. Given the huge rotation of US indices, it is a way to minimize the error due to index reshuffle and to birth and death sample bias. Source: Author’s own Look at the 1999 table. The Russell 2000 posted a 21.3% performance, with an average performance of the components of 25.6%. The median is -7.6%! almost 30 points low. Except in 2002, the median performance of the Russell 2000 components has been always below the average performance, or below the performance of the Index. Two explanations: – The median performance of the components is lower than the average performance. This means that the distribution exhibits excessively large returns on the positive side, dramatically shifting the average return on the upside. – The average performance of the components is lower than the index performance. This means that these indices, being capitalization-weighted, give more weight to large capitalizations. Therefore, large capitalizations tend to outperform small, even within the Russell 2000 Index. Shown below is the distribution of the annual performances of the components from S&P 500 and Russell 2000. Source: Author’s own These distributions are very interesting, especially focusing on the extreme left tail, the right hand part of the body and the extreme upper side of the distribution. Without any surprise, tails are a lot thicker for Russell 2000 than for S&P 500. Moreover, on Russell 2000, best annual performances exceed 1000%. Question is: Given the well-known investor asymmetry between gain and loss, do you think that a stock which is up 100% YTD will be kept in the portfolio by the asset manager? Don’t you think that he would cut the position in order to ‘take his profit’? Therefore, in a stock-picker paradigm, and given the behavioral and cognitive biases, it can be considered as very difficult to keep a large (> 100%) winning position. Thus, the contribution of positive extremes to the Russell 2000 cannot be taken into account in a stock-picking framework. Using medians in order to measure each stock performance seems then a much more reasonable assumption (look below). (click to enlarge) Source: Author’s own This table shows the difference between the median of S&P 500 and the median of Russell 2000. Since 2004, the median of S&P 500 outperforms regularly the median of Russell 2000. In other words, if your stock-picking is not able to catch the extreme positive returns on Russell 2000, then you should shift to stock-picking within S&P 500, as the best proxy of your expected return (the median) is by far higher on the latter index. On the other hand, should you be interested in investing through ETFs, then you can choose to invest in Russell 2000 ETFs rather than in S&P 500 ETFs as you get the performance of the index. Until 2010, the Russell 2000 Index used to outperform S&P 500 regularly. Within the Russell 2000, may we exhibit any pattern? In the image below, colors are important – the more positive, the greener, the more negative, the redder. Rows stand for capitalization quartiles, from the smallest (top) to the largest (bottom). Columns stand for volatilities quartiles from the smallest (LHS) to the largest (RHS). Source: Author’s own Looking at the performance (capitalization (row); volatilities (column)), we can notice that although over the period, the performance of the index is largely positive (+249% total return between December 31, 1998 and November 11, 2015) – meaning it was a bull market on average 7.7% per year, the red cells are much more represented on the right column of the table. This happens when the index performance is negative, of course (2002, 2008), but it also happens when the index performance is flat or mildly positive (2000, 2001, 2004, 2011, 2012, 2014, 2015). On the other hand, these high volatility stocks strongly outperform the universe in two periods out of seventeen: 1999 and 2003, with respective total return performance of the Russell 2000 of +21%, +47%. This means that the outperformance of volatile small caps is very hard to capture because over the long run it may be easy to experience huge drawdowns with difficulties to recover. Keep in mind that when a stock drops by 50%, it needs to increase by 100% to come back to the initial level. Regarding capitalization effect, things seem to be more difficult to explain. As a summary for this part, should you want a smooth pattern, focusing on the low-volatility stocks in N-1 is worth in order to succeed in such a challenge, whereas dealing with historically high-volatility stocks may suffer from huge drawdowns (2002, 2008), and only rare astonishing performances, which may struggle in erasing the previous underperformance. The issue is always the same: what is your investment timeframe? For more information: Why US investing differs a lot from European investing Conclusion Due to the weight of extreme returns, the performance of Russell 2000 is pulled up dramatically. Russell 2000 is a non-representative index of small caps given that the small caps universe can be summarized as “many are called, but few are chosen,” but the ones which are chosen exhibit amazing performances (more than +1000% per year) hiding the many which are not chosen and post performances close to -100%. The asymmetry of actuarial returns (compared to logarithmic returns) then emphasizes these extreme positive returns whose upper limit is + infinity, whereas a stock price cannot go below 0, flooring the extreme bad performance to -100%. Second, given the asymmetry of the investor with gain and loss, these extreme positive returns are not sustainable in a stock-picking framework, as everybody knows that investors are likely to take profit on a largely winning position, meaning that it is very unlikely that they keep an equity position whose performance already equals +100% per year. Therefore, studying the small cap universe through the mean does not seem to take this behavioral bias into account. Using the median seems more relevant. In addition to the data explained, investing in US small caps by picking stocks from the Russell 2000 means struggling with scarce liquidity. In a nutshell, should you want to invest in small caps, do it through a Russell ETF; should you want to pick up stocks, you should rather choose an S&P 500-equivalent universe, as the left tail of the distribution of S&P 500 is a lot thinner than the one of Russell 2000. The development of ETFs and the increasing flows on these strategies and smart-beta and risk premia are likely to increase the pattern we exhibit in this paper. So from now, when speaking about the outperformance of small caps, you can say, “Small caps are smoke and mirrors. Should you want to outperform the S&P 500, you have to be good at picking the stocks (the famous 2% positive extremes), AND you have to be good at timing the market ” Companies whose aim is to pick up US Small Caps almost always underperform the Russell 2000 (Median Performance of the Members < Index Performance). Now you are able to understand why. Would you rationally invest in such a strategy? (Too?) many people are convinced that they have the skills to pick up the famous 2% stocks that post astonishing performances. Be careful as too much self-confidence is likely to turn into overconfidence and a long-term underperformance.

The S&P 500 Is Ready For A Correction – Buy SDS

Summary Historical bull and bear market cycle suggests we are overextended. Earnings are weak, valuations are high. Interest rates are on the way up. This is probably the most hated bull market in history. All along, the bears have been in denial and have been calling for a big crash. To their dismay, the S&P 500 kept moving up and continued making new highs. The bulls have completely demolished the bears. It has reached a point where the bulls don’t give importance to the weak data points; they are happy concentrating on the few positives that still exist. With this backdrop, I want to short the US markets because I believe the markets are ripe for more than a 10% correction with limited upside risk compared to the possible downside. I shall use the historical bull and bear market cycles, the presidential four-year election cycles, the earnings performance and the market valuations to prove my point. As this is a contrarian call, I don’t expect many to agree with me. Previous bull and bear market runs Bull Market data The history of bull market cycles is an important guide, which gives us an idea about the current leg of the bull market. The second half of the 20th century witnessed strong bull runs. I have chosen to study the market cycles from 1942 to the present date; the selected time frame is skewed in favor of the bulls. The first half of the last century wasn’t considered because it had to deal with two world wars and “The Great Depression”. The economical and the geopolitical situation, though fragile, aren’t comparable to that of the early 1900s. Bull Markets with at least a 20% rise, without a 20% drop on a closing basis from 1942 till now SL Start End No of Months % Change 01 28-Apr-42 29-May-46 49.7 157.7% 02 19-May-47 15-Jun-48 13.1 23.89% 03 13-Jun-49 02-Aug-56 86.9 267.08% 04 22-Oct-57 12-Dec-61 50.4 86.35% 05 26-Jun-62 09-Feb-66 44.1 79.78% 06 07-Oct-66 29-Nov-68 26.1 48.05% 07 26-May-70 11-Jan-73 32 73.53% 08 03-Oct-74 28-Nov-80 74.9 125.63% 09 12-Aug-82 25-Aug-87 61.3 228.81% 10 04-Dec-87 24-Mar-00 149.8 582.15% 11 21-Sep-01 04-Jan-02 3.5 21.4% 12 09-Oct-02 09-Oct-07 60.9 101.5% 13 20-Nov-08 06-Jan-09 1.6 24.22% 14 09-Mar-09 ? 82 215.54% Average 52.59 145.40% Maximum 149.8 582.15% Source: BofA Merrill Lynch Global Research, Bloomberg Both in longevity and percentage rise, this market has come a long way and is placed in the third and fourth position respectively. However, the conditions during this bull run are different because the central banks have never printed such massive amounts of money around the world. The excess liquidity was plowed back into the stock markets in search of better returns because gold and a few other base metals peaked in 2011 and have been in a downtrend ever since. Though, this argument holds merit, the current situation is changing. The US Fed has long back stopped its bond purchase, it has gone ahead and raised rates for the first time in a decade. The cushion of the excess liquidity made available every month isn’t there anymore. We shall see higher rates in 2016 and the liquidity situation is likely to tighten further. In the absence of “The Fed Put”, the law of averages should catch up and pull the markets down. Bear Market data Bear markets with at least a 20% drop, without a 20% rise in between on a closing basis since 1942 SL Start End No of Months % Change 01 29-May-46 19-May-47 11.8 -28.47% 02 15-Jun-48 13-Jun-49 12.1 -20.57% 03 02-Aug-56 22-Oct-57 14.9 -21.63% 04 12-Dec-61 26-Jun-62 6.5 -27.97% 05 09-Feb-66 07-Oct-66 8 -22.18% 06 29-Nov-68 26-May-70 18.1 -36.06% 07 11-Jan-73 03-Oct-74 21 -48.2% 08 28-Nov-80 12-Aug-82 20.7 -27.11% 09 25-Aug-87 04-Dec-87 3.4 -33.51% 10 24-Mar-00 21-Sep-01 18.2 -36.77% 11 04-Jan-02 09-Oct-02 9.3 -33.75% 12 09-Oct-07 20-Nov-08 13.6 -51.93% 13 06-Jan-09 09-Mar-09 2.1 -27.62% Average 12.28 -31.98% Maximum 20.7 -51.93% Source: BofA Merrill Lynch Global Research, Bloomberg The average drop during a bear market is 32%; from the all-time high such a fall will take the S&P 500 to 1,452, a level unimaginable now, but that’s what history suggests. I’m not suggesting we will go down to those levels now, even a 20% fall will be highly profitable for us. The risk is, what if this is the mother of all bull markets and the bull run extends by another 70 months with a 300% rise. Anything can happen in the markets; hence, we shall use a stop loss to protect our capital. 2016 is the presidential election year in the US, let’s analyze the stock market performance before and after the new president is elected. Presidential year market performance According to various studies, the stock market gains 9-10% during the first two years of the new president, whereas, the third and the fourth year are comparatively more bullish, yielding higher returns. History suggests a limited upside risk in the next two years; however, since 1952, the last seven months of the election year have yielded positive results but two aberrations have occurred since 2000. The S&P 500 returns from January to March in the election year are mildly positive followed by negative returns in April and May, states a UBS report. I expect the markets to fall during the first five months. Though, the cycles indicate a possibility, stock market returns are closely linked to earnings and valuations. We shall analyze these in the next two sections of this article. There’s a slowdown in earnings Let’s look at a few data points on earnings. According to Bloomberg , the second and third quarter of 2015 have seen negative profit growth for the S&P 500 companies. The expectations for the 4Q 2015 earnings are also negative. A Thomson Reuters report states that compared to 26 positive EPS preannouncements by corporations, there were 86 negative EPS preannouncements by the S&P 500 corporations for Q4 2015. The negative/positive preannouncements ratio in Q4 2014 was 5.1 and in Q4 2015 was 3.3. Both readings are above long-term aggregate ratio of 2.7 taken since 1995. This indicates that the companies are not able to meet their expectations and guidance. Though, Thomson Reuters expects earnings to pick up in Q1 and Q2 of 2016 by 3% and 4% respectively, the current quarter has experienced a downward revision for seven of the ten sectors of the S&P 500. With the current trend, I won’t be surprised if we see negative revisions for the first and second quarters of 2016 going forward. Though 43% of the companies have reported revenue above analyst expectations in Q3 2015, it’s below the long-term average of 60% and lower than the last four quarters’ average of 52%. This shows a declining trend. However, Thomson Reuters states, on the earnings front, 70% has beaten analyst expectations, which is above the long-term average of 63%, and in line with the average of the last four quarters at 70%. In Q3 2015, the share-weighted profits were down 3.3%, the worst figure since 2009, states Bloomberg. Low energy prices and a strengthening dollar are negative for revenues as well as profits. After the first rate hike by the US Fed in almost a decade, the dollar is likely to strengthen further in 2016, with another 0.50-0.75% of rate hike expected by the experts. Some more negative signs for the stock markets In the first nine months of the year, Standard & Poor’s Ratings Services has downgraded US companies 279 times compared to 172 upgrades, this is the worst figure since 2009. Even Moody’s Investors Service has downgraded the credit rating of 108 US non-financial companies against 40 upgrades in the month of August and September. This is the most two-month period downgrades since May and June 2009. According to one metric followed by Morgan Stanley, the ratio of debt to earnings before interest, taxes, depreciation and amortization for investment-grade rated companies was 2.29 in the second quarter. In June 2007, just before the start of the crisis, the same ratio was 1.91. The Wall Street Journal has raised concerns about the balance sheets of the US companies. According to Casey research , the US companies have issued $9.3 trillion in new debt since the financial crisis. The companies have issued record bonds both in 2014 and 2015. Bloomberg business reported that the S&P 500 companies spent 104% of their profits on share buybacks and dividends instead of using it to invest in their business. The last time share payouts crossed 100% was in Q2 2007, just before the end of the bull market. A lot has been written about the junk bond market crash recently. Warning signs are all over the place. What’s the CAPE ratio indicating Are the markets over or undervalued according to the p/e ratio? We use the popular CAPE ratio also known as the Shiller p/e for our study. Shiller p/e Mean: 16.7 This is a popular ratio having both its followers and critics. Though, the reading during the dot-com bubble and Black Tuesday was higher compared to current readings, all other tops have formed at or below the present value. We might not fall just because the ratio is high, but it warrants caution. What does all this indicate We have used multiple studies to arrive at our conclusion about the current state of the bull market. The cyclical study, the drop in revenue and earnings, the red flags in the bond markets, high valuation compared to historical averages all indicate that the average investor should be careful about his holdings. With the US fed tightening interest rates, the trajectory of the rates is on an uptrend. Though, the US economy has displayed strength, the commodity markets, the energy markets, the slowdown in the Chinese economy don’t bode well for the bull run to continue. The markets will likely see a drop in 2016 and we want to go short the S&P via the ETF route. How to take advantage of the drop in S&P 500 Let’s look at a few options one can use to benefit from a drop in the S&P 500. Shorting futures It’s the favorite tool used by professional traders to benefit from a fall. However, it might not be a suitable option for the inexperienced trader, because you have to maintain a margin account to enter the trade. You have to actively manage your positions, you can’t short it and forget it. Buying puts The risk is limited in this trade, however, time value eats into the option premiums. Even if the markets remain at current levels, you will lose all your money if you buy at-the-money or out-of-the money options. Professional traders use complex options strategies to limit their risk and benefit from a fall. To benefit from options, you have to get both the timing, direction and the extent of the fall correctly, which might be difficult. Buying inverse ETFs Leveraged inverse ETFs like the ProShares UltraShort S&P 500 ETF ( SDS) Leveraged inverse ETFs can be bought and sold like stocks. SDS is -2x inversely leveraged against the S&P 500, which means, if the index falls by 1% in a day, the SDS ideally should gain by 2%. In the short term, the correlation is maintained; however, as the calculations are done on a daily basis, over the long term, the correlation is not perfect and can reduce well below 2 times. It’s called as beta-slippage. If the markets rise by 1%, your investment in the SDS will drop by 2%, hence, the risk and reward are maximized. As I expect most of the fall to happen during the first five months, I have advised a buy on SDS to profit from the leverage. In case you are not comfortable with the option of using 2x leverage, you can also buy the ProShares Short S&P 500 ETF (NYSEARCA: SH ), which is -1x inverse correlation to the S&P 500. Here, your risk and reward both are lower compared to SDS. If the markets make a new high and the S&P 500 trades at 2,175 levels (2% more than the current all-time high), we shall close our position and accept our assumption to be wrong. In reference to the current S&P 500 levels, the stop loss is around 5% and the profit objective is more than a 10% fall on the index. Conclusion Calling a top is very difficult, but the indications of a fall are building up. I believe the markets are ripe for a fall and investors should use this opportunity to profit from the fall. I recommend a buy on SDS at the current level of $19.54.