Is tiggers are wonderful things!
Their tops are made out of rubber;
Their bottoms are made out of springs!
They're bouncy, trouncy, flouncy, pouncy,Fun! Fun! Fun! Fun! Fun!
But the most wonderful thing about tiggers is
I'm the only one!
There isn't a person on the planet better at beating me up about trading than me. Today, however, I'd like to give myself a hearty pat on the back. This is one of those few days that I'm really pleased at how I handled myself.
I came into this day with 84 short positions and no longs (I sold my SPY before the opening bell at a profit). And I ended the day – a day in which all the major indexes were higher! – with a profit. It wasn't a huge profit, but for me to have that many shorts at the day's beginning and end the day with a profit is something about which I'm quite pleased. (I did a fair bit of successful day-trading on the long side).
So, I'm happy with myself, big deal. What's to be learned? Well, it all comes down to anticipating moves and executing based on that plan. In my case, although I thought there was a risk the market would pop higher (hence the SPY hedge), I thought there was still potential for more weakness before a real bounce happened. I swiftly moved through all my positions and took profits on most of them. As I sit here typing this, I still have 29 shorts that, in my opinion, continue to offer good risk/reward. They are balanced by one very large SPY position. So I'm presently half in cash with a 33/67 split of long/short in my actual positions.
But here's the most important point I have to make: I look at over 1,000 charts every single day (yes, I'm quick). And I cannot remember any instance in my life when I've seen a greater abundance of short setups. These setups are far too risky at these heavily depressed levels. But – oh, my God in heaven – given an adequate bounce, it is entirely possible that I will position myself with literally 200 different securities that, collectively, offer a tantalizing opportunity for a serious fall.
So how long do we have to wait? I dunno. It took 30 trading days from the March bottom to the May peak before we flipped down again. The next ascent higher from bottom to top took a mere ten days. Maybe this next lift will take just a week – I honestly don't know. The price level is what counts, not the day of the week.
I don't want to have to trust my judgment on when an index may or may not have peaked. I will more than likely be wrong (as will you, bucky). I am comfortable, however, looking at all the stocks in my Bear Pen each day and, as they are individually at levels that represent a prudent entry point, I shall enter them one by one.
What's the risk in being so "light" right now? Well, for a bear like me, the risk is that the bottom will fall out, and I won't be fully participating. Believe me, that's a nearly omnipresent dread of mine. But to heavily short a market simply based on the prospect that there's a chance it might fall the next day is, to me, illogical. I take the market on a chart-by-chart basis, and I spread my positions thin.
So I must exercise a virtue which, for my personality, is absolutely puny – and that is patience. I say to you again that I think the most fantastic bull trap in years might be forming over the coming days or weeks. What will the catalyst be? Maybe all the rah-rah surrounding the prospect of that jackoff Bernanke introducing QE3 at Jackson HOLE late this month.
The most delicious irony, of course, would be if a rally into his HOLE speech delivered to us bears the aforementioned bull trap. We shall see. But the reason hardly matters. I simply believe that, although it may take a little longer than I'd like, our deliverance may soon be at hand.