The market was down, big-time, yesterday and while our client accounts were mostly in cash (generally over 80% in cash), we still made some decent money in our inverse ETFs. At the close, yesterday, in all but the ULTRA-MAX strategy, I moved all portfolios to cash.
Today, with the bounce in the market, I put about 10% back to work (in ULTRA, Total Market and Diversified Income) in the 4 index inverse ETFs. Why? Because the trend is still bearish and as such, I expect the market to move lower in the near-term. But, the market moved significantly higher and that hurt our inverse ETF trades. I plan to hold these positions and see how the market moves tomorrow. If it looks like the market wants to move a lot higher, I'll sell us back to cash.
We are up nicely in Tactical Growth so far for the year, so I didn't want to put any risk on the table for that strategy today and kept it in cash.
This market has a recent habit of saw-toothing its way down... big massive down-day, followed by a not so massive up-day. Yesterday was a 3,000+ point down-day (largest point drop in history, actually) and today, we got a garden-variety (in this market) 1,000 point up day. If recent history holds, tomorrow could certainly be another down-day. With a tiny (in all but ULTRA-MAX) amount short the market in our inverse ETFs, it won't make a big difference one way or the other, but I would like to pick up some percentage gains in the 3 strategies noted above.
I am working toward getting our ULTRA-MAX strategy fully invested in 2x inverse ETFs. This is a much higher risk strategy, so I am willing to take some pretty tough short-term losses in the up-days, as we look to capitalize significantly on this longer-term bearish-trending market.
The government is trying to put massive amounts of money into circulation with bail-outs, free money to everyone, no interest loans, tax holiday, credit card fee reductions, etc. The free money, at this point has no price-tag, but that will change in the future. The Fed and the White House and the Congress are acting like the world is about to come to an end if they do not pump trillions of dollars into the economy in just about every conceivable way possible. If it is all that bad (and maybe it is), I am not sure all of this free-stuff is going to suddenly make people want to get out and spend more money. I don't see the totally disrupted supply-chain of both demand and supply getting back on track any time soon (especially since we are all supposed be sheltering-in-place). I don't see how all of this free money is going to get the price of oil back to a break-even level for oil producers to survive.
Big and small companies (and just about anyone else) are lining up at the door for a hand-out of some kind. I hope this is the right thing to do. Seems more like a panic to me and we're being told not to panic. Hard to square that logic...
Be safe and avoid the crowds...