The Weight of Weightings.

Is there any other option?

Hedges remain the order of the day.

As we know from the portfolio, there are still plenty of things to be long within the index.

It’s not as exciting as it was a few weeks ago, but I will take it.

This is where I have to balance index weakness, which is often what people mean when they say “stocks,” with the bias I have where my portfolio is full of longs.

So, where are we?

This sell-off has not been as “strong” as April. Of 1900 trading days, only 36 ever reach that level.

Does that mean we go long on the index?

No, because the top chart I have posted every day for 9 months says we are still in negative territory.

There were 300 longs in the dashboard this weekend!

Yes, there were. The breadth is a double-edged sword. Yes, there are a large number of companies moving in a positive direction, and cumulatively, they can outweigh the Mag7. However, there is a second, far more important component: they cannot cumulatively outweigh the pull of the options traded on those companies.

This is highlighted simply by looking at the disparity in total options traded on the index ETFs. The difference between SPY, QQQ, and IWM is vast.

Even with the recent outperformance of IWM, it doesn’t even outtrade NVDA and only just edges past TSLA.

There lies the double-edged sword. If we take another significant move, all the options struck on all these indexes and larger equities will exert a smaller force on the market.

All that said, and I do hope it is helpful, I don’t care.

I am not long the index.

I am long a load of “boring” utilities, etc., and I know where I will sell them if they stop going up.

That sounds dismissive as I write it, but there isn’t any other way to say it.

The system that got me long sexy stuff and then sold it is the same one that now has me long boring stuff. Let’s see if we sell it to buy different stuff in the future or because nothing is going up anymore.

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Adding new positions this weekend has increased our potential drawdown. Having 47 stop losses instead of 32 obviously will do that.

Open equity = 25.1%

Closed equity = 20.1%

Stop loss drawdown = 19.6%