Although the day is young, a 30 point move in the SPX with a broken trendline is sufficient for us to begin hedging. We closed some UPRO positions in family accounts, liquidated some QLD positions and laid on an SPXU position in the hedging account we use for losing money. This account is an external account so we can use $3000 of losses at tax time whereas the profitable (highly) accounts are largely IRAs.
We have been talking about the danger of the April trendline — well, it’s here. SPXU is a leveraged reverse ETF which can be used to hedge an SPX position. Based on recent market behavior we think this downwave should be sharp and truncated, but if the hedge funds jump on the market it might be painful. Our crystal ball is a little cloudy (with a chance of meatballs) right now.