Interest Rate Whack

Remember Saudi Arabia says the production cut will continue through April and as of Friday both WIT and Brent Crude oil futures were still in backwardation meaning the front month's prices are higher than the deferred months, a sign of tight supply.

Consider keeping the position unless WTI declines below the trendline. In addition, April options are now the front-month so an adjustment should be made soon.

ProShares UltraPro Short QQQ (SQQQ) 14.01 up .19 points or +1.37% last week. At 3X short QQQ, it's now just above the 50-day Moving Average at 13.71. Last Wednesday it closed down to 13, but didn't closes below 13, the trigger point to close this position, according to the original trade plan in Digest Issue 10 "Bumpy Ride [Charts]."

Since both Federal Reserve Chairman Powell and Treasury Secretary Yellen are scheduled to testify at a Senate hearing on Wednesday to make the case why the latest fiscal spending package will not likely ignite inflation expectations, the plan is to keep this hedge open to see how the increasingly anxious markets react.

Financial Select Sector SPDR Fund (XLF) 34.22 slipped .55 points or -1.58% last week, advancing Thursday as the yield on the UST10Y Note increased 8 bps, but gave it back on Friday. According to the trade plan in Digest Issue 11"Rotation Evaluation [Charts]" keep the call spread open unless it closes below 33, just above both the 50-day Moving Average and the upward sloping trendline, USTL. Consider it a combination uptrend and long interest rate hedge.

Strategy

In bull markets, the best strategy is to stay long equities and/or ETFs and then tactically hedge pullbacks as they begin developing since ordinary pullbacks can become corrections when something unexpected happens. Then corrections can become downturns when something else unexpected happens, and downturns can become bear markets when many unexpected things change medium and long-term fundamentals.

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Disclaimer: IVolatility.com is not a registered investment adviser and does not offer personalized advice specific to the needs and risk profiles of its readers.Nothing contained in this letter ...

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