The tape is feeling heavy, no doubt about it.  We touched on it in the weekly newsletter and all day yesterday.  Yesterday we saw some rotation into the financials and out of technology, although by the end of the day  the financials too closed near the lows of the session.

Yesterday we started the hedging process, starting with the energy sector first.  While we think the energy sector will fall less from this point forward than some of the more defensive sectors that have rallied hard the past few weeks (energy and financials have already fallen some recently), our exposure to the energy sector never the less has to be hedged somewhat.  

For today we see immediate downside to the $1310 level on the S&P 500 futures from a still unfilled gap from April 20th.  Beyond that  things get a bit murkier although we don't feel the 50 day moving average on teh S&P5 500 cash index to hold as much support.  

From a seasonal perspective a larger and longer lasting sell-off here (5-10%) over the summer should be in the cards.  On the other hand, the invisible hand (read Brian Sack at NY Fed) still controls the markets and we don't want to 'fight the fed.'  Caution is to be exercised.  

We are holding on to our longer-term positions but playing agressive defense.

Play well today

Serge

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