Baffling Breadth

Hedge Thought Follow-up

Last week's hedge idea in Digest Issue 34 "Breadth Disappoints [Charts]" quickly became a nonstarter as the SQQQ opened near last Monday's SU (stop/unwind) at 8 and quickly declined on Pfizer's FDA vaccine approval news.

Strategy

In bull markets, a good 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.

Since reversing just above the 50-day Moving Average on August 19 on 2.2 bn shares the SPX volume declined slightly, but hardly enough to call it light August trading activity. Perhaps geopolitical macro events that seem to occur in August are one reason In addition since Jay Powell offered no clarity on the start of bond-buying tapering by the Federal Reserve on Friday, this macro concern has been deferred for a least another month.

Summary
Multiple new highs by both the S&P 500 Index and the Invesco QQQ Trust confirm the bulls are clearly in charge despite the weak record for the month of August when trading volume typically declines along with a dubious historical record of geopolitical events that seem overwhelmed by continuing support from the Federal Reserve.

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