TBT Update, 3-year Downtrend Broken, SJB 7-month downtrend broken, VXX & SDOW

 

Today's 400-point drop in the DJIA (-2.26%), while small-caps dropped over 3%, underscores why we seek to hold hedge positions when market conditions warrant it.  

 

We've been stridently bearish on stocks since the start of 2015, especially since May of that year when the DJIA briefly traded above 18300, with a few exceptions when we were short-term bullish during which times markets rallied tremendously.  Otherwise we've insisted on only holding stocks which pay high dividends and did well with that plan, and so too with gold and oil.

 

Below is a 2-year chart of the DJIA, with the red line showing that the DJIA has mostly traded far below the 2015 break-even level and is now back near that level.

 

 

 

We strongly believe it'll trade far below that red line level again, very soon and possibly for a long time to come.  Accordingly we hold SDOW and also VXX, per this posting last month.

 

As stated in that post, since the DJIA closed below 18450 on August 26 the next market day we doubled our VXX at $36.90 and added SDOW at $13.20 

 

We'll stop out of SDOW if it drops to $12.70 and have no stop as yet on VXX.

 

If you too hold these, or are considering them, please be aware of the risk in holding levered 3x instruments such as these, especially on the short side.

 

Never over commit to such holdings.  Never over commit to any holding; long, short, levered or not.

 

 

TBT has broken a nearly 3-year downtrend.  If you don't have it, or wish to buy more, now's the ideal time.  Here's a long-term chart:

 

 

Here's a close-up look at TBT, showing the long-term downtrend broken:

 

 

Per our posting yesterday, we did buy TBT over $32.30, paying $32.35 this morning.
 

Deutsche Bank says 35-year party is over for bond bulls.  This article relates to TBT because, as we've explained in the past, rates set by the Federal Reserve follow rates set by the much bigger bond market, not the other way around as is popularly believed.

 

Note that the "flight to safety of gold" is also largely a myth.  While it's only a single day, it's worth noting that today's market shock resulted in gold going down (-0.7%) not up, and silver dropped big (-2.9%).  Recall that during the market rout of 2008 gold plunged along with the stock market.
 

 

Today SJB crossed above a 7-month downtrend:

 

 

SJB is an instrument for shorting junk bonds.  Read about it here. 

We went long SJB today at $25.30 


 

 

 

 

 

 

 



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