50% Friday – Indexes are Halfway to What?

In the past 3 days, we've taken back 50% of the drop that we had in the prior 3 days...

So far, so good.

In the past 3 days, we've taken back 50% of the drop that we had in the prior 3 days but, if you think about it, that's not as strong going up as it was coming down and certainly the volume is fading with just 85M shares traded on the S&P ETF (SPY) yesterday vs 142M shares last Thursday (1st) on the way down.  Total down volume for the 2nd, 3rd and 4th was 438M shares while total up volume for the 5th, 6th and 7th was 346M shares so 1/4 less shares traded with 50% less results.

What that means, in a nutshell, is there was a net exit of cash from SPY and, so we infer, from the entire market and that's like letting the air out of a ballon (or, in this case, a bubble) – it's simply not able to get back to the way it was before.  That's why the 5% Rule demands symmetry, you need to rise as fast as you fell or we're still in danger and, since we're going into the weekend – we'll be adding back some hedges in the Short-Term Portfolio as we lightened up when we crossed over our Strong Bounce lines (which are all green at the moment).

We are still going back and forth with China and Monday we get a USDA Report on Farming just as China has halted the purchase of US Farm Products and is threatening to put Tariffs on them when they resume.  So a lot of uncertainty into the weekend is a good reason to maintain our hedges and now we're watching the 50-day moving averages to see if we can confirm a return to strength by the indexes into the weekend – that will determine our hedging stance – which we'll have to determine in our Live Member Chat Room during the day.

Have a great weekend, 

  • Phil
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