MarketSmith shows the U.S. Indices have been under pressure since the March 29 pivot high. Over the subsequent 35 trading days, institutions have been selling into strength for 23 trading days. With the markets down 20% (+/-) on Thursday last week, and pressuring lower this morning, we continue with a simple strategy of hedging with inverse ETFs while reducing exposure (risk) in equities.
Summary
MarketSmith Sentiment
Sentiment indicators on the MarketSmith home page show 8:1 down volume. Over the past 35 trading days, this sentiment summary presented us with a more cautious approach.
News is bearish almost everyday, a sign of fear.
Simple Strategy
When the markets get bearish we use a simple strategy of hedging with inverse ETFs and puts when volatility is fairly low (VIX = <16 +/-). With VIX above 30, we usually stick to SPXU, SQQQ, QID, and SDOW for inverse index hedging.
SPXU below is breaking its downtrend with volume picking up.
We also look for bounces that get rejected at overhead resistance for new entries.
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Happy Trading,
Vinny
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