Offered a chance to resolve the suspense Friday the market played coy, so the issue remains unresolved. The market principle should be remembered: The market will do whatever it can to cause the most pain to the most people.
We have been thinking (thinking thinking thinking) that given the present uncertainty a prudent thing to do might be to start putting on a hedge. If it breaks out up you lose a little on the hedge. If it breaks down your equity is at least partially protected. There is some technical basis for this strategy: The formation drawn above is a wedge and rising wedges tend to break down. And, at the moment, if you looked at the pattern as in a channel the next most probable move is down to the bottom trendline. Detailed hedging instructions are beyond the purview of this letter — but generallly speaking you can buy puts, sell calls against your position, buy a reverse ETF (SPXU, for example, a leveraged bear ETF on the SPX — or even lighten up your long positions.) If you don’t have a broker knowledgable about these things, get one. If you want a reference email us (firstname.lastname@example.org). Tdameritrade crosses our palm with enough free trades to buy an ice cream cone for references, and their handling of our accounts has been completely competent and professional.
We took a decent profit on our short bond trade (about 25%) and looking at the gaps in gold and silver (totally unexplainable) dipped a toe into each issue.