Lookout below.

I was shorting the SPDR S&P 500 ETF (SPY) most of the day on Tuesday, adding to my already-large short position.

There are a number of factors that have contributed to my decision to go net short in a big way, including:

  • Narrow Market Leadership. We're back to a market that's basically led by the FAANGs -- Facebook (FB) , Amazon (AMZN) , Apple (AAPL) , Netflix (NFLX) and Google/Alphabet (GOOG) ,  (GOOGL) . Facebook, Amazon, Apple and Alphabet are holdings in Jim Cramer's Action Alerts PLUS.
  • Rising Short-Term Interest Rates. The 2-year U.S. note yield is up about 1.3 basis points at 2.39%.
  • Complacency. I'm seeing more investor complacency -- anecdotally, in the business media and elsewhere -- ever since market's main indices rallied off of their recent lows.

  • Gold. The rise in gold looks solid. I'm currently long the SPDR Gold Shares ETF (GLD) .
  • Lackluster Banks. We're seeing disappointing action in the financials. However, I continue to buy them. I'm long Bank of America (BAC) , Citigroup (C) , JPMorgan Chase (JPM) and Wells Fargo (WFC) , although I'm shorting Goldman Sachs (GS) .

Lastly, with S&P 500 closing at 2,706, the downside risk relative to the upside reward seems to argue in favor of maintaining a net-short exposure.

I've previously stated that I expect the S&P 500 to trade in a 2,200-2,850 range for 2018, with about 2,400 as fair-market value.

That means there are 506 points of downside risk to the low end of my S&P 500 range (2,200) and 306 points of risk to my fair value estimate of 2,400. However, I only see approximately 143 points of upside potential to the top of my predicted S&P 500 range (2,800). That's not a good risk/reward ratio.

At the time of publication, Kass was long BAC, C, GLD, JPM and WFC and short GS and SPY, although positions may change at any time.