Textual Intercourse

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Well, I'm hunched over in a little plastic chair at a gymnasium where my kids are running around, and I'm using my son's portable Macintosh to type up a new post. I don't have my charts with me, so this is going to be an all-text post. Now all I need to do is think of something to say (I estimate I've done well over 5,000 posts during the course of Slope, and sometimes it gets a little difficult to think of the 5,001st topic).

FOMC weeks are a bit of a killer, because people spend the time prior to the announcement in an anticipatory funk. I'm not quite sure what the Fed could say to make this hyperbolic market go super-hyberbolic. I imagine a hint from them that interest rates sorta kinda have to go up at some point might freak people out. I, for one, am going to steer well clear of 2:15 EST on Wednesday. The spasms of the /ES around that time are, at best, amusing, and, at worst, horrifying. It goes without saying that any break in the S&P better than a meager few points is going to require some kind of "oh, crap!" reaction from the market based on what the FOMC says.

The well is also poisoned by the enormous incentive the investment banks have to prop things up through the end of this month (which will dictate the size of those enormous yearly bonuses). They are going to do everything in their power to prop things up. Everything.

In my own trading, I have become increasingly inclined to take large, and quite temporary, ETF positions. My favorite trading vehicles recently have been UNG, GLD, and GDX. Items that are very liquid, have a one-penny spread, and have pretty well-defined patterns have allowed me to scalp a few thousand here and a few thousand there to act as a salve against the hockey stick rise in the market. That is why – as I've tried to explain – my declarations that gold is in trouble seems in complete contradiction to the fact I am dropping big positions like hot potatoes.

But it doesn't come from a change in opinion. I am simply trying to get decent entry and exit points. GLD is a good example. I covered this morning at about 97.70 and I re-entered the exact same short late in the day at 98.20.

The overall equity market's uptrend is absolutely intact, and my shorting is speculative. Even if we drop to 950 over the course of days or weeks, the uptrend will still be intact. Only after we (a) push higher and fail to make a new high, then (b) snap below the aforementioned 950 do we have some serious breakage in bull-land. Until then, they continue to rule the roost, and they will continue to crow about it.

But the psychology is playing out exactly like I would think at a time like this. Hubris, obnoxiousness, and a sense of infallibility have seeped into the brains (such as they are) of the bulls. Depression, fear, defeatism, paranoia, and crushed confidence have swept across the bears (those of us who have survived this far, at least). And I say what I've said before – those uttering that they are "neither bull nor bear, but simply trade what they see" need to have Joe Wilson spring up and shout "You Lie!" to their face. Because such a trite truism is just as insipid and impractical as the quote that there are two rules to trading: "(1) Don't lose money (2) Don't ever forget rule (1)."

The bottom line is this – – it took guts, vision, and perspective to go long and stay long the market in March. Those who did – and stuck with it (I am not among them) have had tremendous success. It would have been all too easy to ridicule those folks back in March. No one is laughing now. The shoe is on the other foot now. The question is: how long will it remain there?

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