It's about time our hedges made some money! As you know, we've remained cautious, even while making money on the long side and, just this weekend, in our June Portfolio Review, I said to our Members: "I'm still very risk-adverse in this market and yes, we could be making more if we were more aggressive but then again, we could blow it too – and that is what we're trying to avoid."
We're very well-hedged so a dip like this is simply amusing and it's miles to go before we even get back to the strong bounce line at 2,728, which had been the top of our range since February. Unless we fall back below that line on the S&P (/ES) this is just a minor pullback and we're still in bullish territory though failing at the 2,800 line (again), which is where we ran into trouble in March before pulling back 200 points (7%).
7% is right about the pullback we are expecting but we expected it from 2,728 – this move back to 2,800 has been a bonus round so far. Above the 2,800 line, we have to capitulate and get more bullish – no matter how much we don't trust the rally but that certainly isn't a problem we'll have to deal with today, as we're down around 2,764 so far in the Futures.
If you feel under-hedged, you can use a play similar to the DXD play we gave you in our 6/7 Morning Report, when I said:
That's how hedges are supposed to work – they are insurance policies and keeping our portfolios well-hedged is the only way we can sensibly keep long positions after they've already gained 20% for the year.
Maybe this is a full-blown 1998/1999 rally but we've got PLENTY of longs so all we're worried about now is whether or not we