Last Friday morning, I indicated that I was close to removing the hedge. Later that day, the Hedge was stopped out with a stop buy good-till-cancel order while I was out of the office and the direction became UP on the indicators. My sector etf trading strategy has moved up to 40% long and my momentum etf trading strategy has one position. So, I have some longs, but not a ton of them.
Typically what will happen. if this rally is to be a new strong bull run, will be a slow rise in percent invested long as more and more instruments hit their own individual buy signals and the hedge indicators will move dramatically away from yielding another down direction signal. This market has a lot of work to do before those things happen.
I have no idea whether this will be another major up move or not. I do know that the FED has announced raising interest rates which they have already started doing. I know that last Tuesday the shorter term yield curve inverted, which has usually brought on a recession in the subsequent 12-18 months. I do know that unleaded gas futures is up over 13 cents a gallon today alone. Wheat futures is up 85 cents a bushel today. Inflation seems to be embedded into price trajectories now nearly everywhere I look. And then there’s that war that seems to not be solved in Ukraine. If the stock market can climb against all these factors, it will be the real deal.
However, with so much going on, I’m taking the hedges off, and waiting patiently to see if more etfs get long (While writing this one more etf went to a buy) and commodity prices start moderating before getting too excited about this rally. I don’t predict and I am not in this case either with respect to my trading, but this eerily reminds me a time before many of my followers were born: the early 80’s. Inflation was out of control, short term interest rates were raised to 15% or so, the cold war was in full bloom and stocks had to work through all that before turning up strongly coming out of it.
In the meanwhile, I’ll let this play out and enjoy the ride!
Very helpful and insightful post. ETR!
Great post Tom. Thanks. These are very helpful. Appreciate you taking the time to write these.