Quad 3 and Quad 4 exposures getting a bid!

Risk off!

Quad 3 is still the dominant Micro Quad here.

Quad 4 got a bit stronger this week. Also look at volume, back-to-back distribution weeks!

I took my hedges back on (50% on a short of IWM and 50% on a short of QQQ) again last Friday (just to see the market pop on Monday, but I stayed strong ;-)).

This is a toxic, toxic tape, so staying protected is the theme here. The reference ETF Portfolio stays in cash (great time to start it ;-))

The only positive here is, that breadth is really bombed out, if we cross below 10, things can get interesting (e.g. we will be on a watch out to an improving Quad!).

Volatility is trending, no lower low since 6 Weeks!

So, the argument here is: “everybody is protected because volatility is trending and that is bullish”. Yes and no, I think that argument is true 90% of the time, until it is not, and the left tail event is destroying your portfolio. In a strong Quad 1-2 I would follow that bullish argument, but not here!

Furthermore, I am not seeing extreme downside protection —> see the white line in the chart below, that level would be an extreme downside protection: this was the case in June and October last year, right now I am not seeing it, we are not at extremes.

Positioning on the Russel is neutral, Specs buying the dip. That is not bullish —>

Look, I have no idea where the market is in 6 weeks.

The only thing I know that the short-term correlations of Network Momentum (= strong trending factors —> which result into the Quads) is not favorable at all.

If it would be a pure Quad 3 while Quad 4 stuff is not getting a bid, it would look more constructive to me, but this is not the case. Gold + the Dollar + volatility strong is simply too dangerous for me.

And again, I do not long TLT here, it is not bullish trend ;-)

For next week the call is to stay protected.

All right, have a great weekend.

All the best and best regards

Andreas

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