Last week, I unveiled in great detail the results of an incredibly innovative and effective way to hedge a portfolio and provide double-digit annualized gains in any market (fine print: so long as there is not a prolonged multi-month sustained one-way trend). Thursday's session was an excellent demonstration of what happens when you're using Darwin's paired short leveraged ETF strategy. In a down market day (S&P500 down 3%), the paired short pair portion actually gained $456. While this didn't completely offset the losses in the long portion of my portfolio, it's a nice contrasts to the red elsewhere on the screen that day.

The ultimate kicker though, is over time, the strategy's in the green on both up and down days. Note how ERX and ERY (Direxion 3X Energy Index) are BOTH up on total gain to date? How? Read the background article for more, but basically, leveraged ETFs lose value over time due to daily rebalancing and they stink so bad as long term holds that they make for GREAT long term shorts. Now, guessing which one to short can be especially painful if you pick the wrong one, so shorting them together is especially beautiful. Again, the risk that needs to be managed is how to handle a runaway market that never reverses direction. There's a remedy for that which involves options and is too complex to cover every iteration in advance - you've gotta react to each situation individually.

Another week another 100 points lower.

Yep, that’s all it was, we lost all of 100 points more than last week, when we fell from 10,725 to 10,172 (553 points) and this week we dropped from Friday’s Dow close of 10,172 all the way down to 10,067. Yet you would think the world had come to an end to hear the media and the traders freaking out. I’m not going to try to explain it, I can’t. Maybe it’s because going into last week we were very bearish but, starting on the 22nd, we let ourselves finally get a little more bullish AND THE MARKET BETRAYED US!