As of last week, the Market Climate for stocks was characterized by unfavorable valuations. Market action was mixed, with breadth and generally positive trends in major indices being the most favorable aspects, while strenuously overbought conditions persist. We also saw some “climax reversals” and other features characteristic of exhaustion late last week, but that evidence is tentative, and would probably be cleared on fresh highs in the major indices. For now, the Strategic Growth Fund remains well hedged, though we've shifted the composition of our hedge modestly. The relatively low level of option volatility last week, coupled with a fresh high early in the week and a selloff on Friday, allowed us to improve the effectiveness of our hedge with less upside “drag.” Specifically, we modestly reduced the number of straight long-put / short-call combinations in the Fund while simultaneously raising the strikes of some of our put options. Overall, the Fund remains well hedged.
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