Beware the boojum…

1009spx

 

http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=9&dy=0&id=p20049953156&a=214966864

The trendline from no12 is broken  Based on the look of the market we think a bounce is in order, especially considering today’s pattern.  But the boojum is lurking out there along with the snark waiting to eat up complacent investors.  Here is the question:  Even if there is a bounce it will be the beta wave and the gamma wave will undoubtedly follow to test the wave low.

If Boehner refuses to bring the shutdown and the debt limit to a vote we could see the unthinkable happen.  And the unthinkable  results in the unbearable in the market.  With such madness roaming the capitol in Washington we have chosen to be hedged.  It is a decision investors must make for themselves.  And in fact some of our family accounts are just sitting  and grinning and bearing it.  Hedges almost always lose money, but if the market tanks because of Washington hedged is the way to be.

The nov12 trendline is broken as you see here.  Not a good sign.  And prices are not that far off from the other important trendline — more so in the Indu than the S&P–but still…SPXU and DOG are reasonable hedging vehicles.  If you have a reasonable broker  you can also hedge with puts.   Get ready for painful events.

Our take is, when you see a typhoon — even possibly– on the horizon, reef the sails.

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This Post Has 2 Comments

  1. williamhornsby

    Excellent chart, thoughts, ideas and recommendations.
    Professor Bassetti, you are the best.
    Bill from Cary, IL.

  2. WHC Bassetti

    thanks

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