As I was going through charts this weekend, I was facing the situation that I've mentioned frequently of late: that is, a surprising number of very impressive looking potential long positions, in addition to the usual short opportunities. So great in number were these potential longs that I realized the potential for a meaningful rally this week (which got a huge kick-off today with over 250 points on the Dow) was very real.
Setting aside all this bull/bear dichotomy, one thought kept pressing itself upon me: I do not want to care what the market does. In other words, given the stunning amount of uncertainty right now – and, yes, it's more than normal – I really am sick and tired of wringing my hands each night about the /ES is doing (or the Euro, or Gold, or Oil, or anything else).
What I wanted this weekend was to already be in position with both longs and shorts, but that was impossible. My positioning was on the short side only, with about two-thirds of my portfolio in good old cash. So I knew today wasn't going to be that great.
In spite of being only in short positions, the damage was dramatically mitigated by two factors: (1) all that cash I just mentioned, which doesn't budge; (2) the willingness to enter a quantity of long positions to help balance out the short ones. Indeed, by day's end, I had almost precisely the same quantity of positions on each side.
All other things being equal, this makes me market-neutral, but that of course isn't exactly my goal. Cash, after all, is market-neutral, and it's a hell of a lot less work than what I put myself through. Ideally, if my long choices are better than the normal long, and my short choices are better than the normal short, I would hope to eke out a profit irrespective of market conditions. To "eke" isn't really a grand goal either, but in these extremely uncertain market conditions, I feel a lot better about being balanced than I do being entirely short or entirely long (ha!; like that's ever happened).
Let's take a quick look at the NASDAQ, which pretty much typifies any of the big equity indexes right now:
On the bullish side of things, the lift over the past couple of days has been merciless to the bears. That five-minute-long fake-out Friday morning was positively malicious, and in many ways today's rally was heartier and more sweeping than Friday's.
On the bearish side of the ledger, the market is all-too-quickly lifting prices up to the Come To Butthead levels that I've been watching. But as much as I love technical analysis, I do know that nowhere is it written that prices are not permitted to cross resistance levels. I simply observe that the likelihood of bearish opportunities being profitable increases as prices push up toward former failure zones.
Just as everyone wasted a huge amount of emotional energy on the Jackson Hole speech (I mean, my God, we worried about that for months, and its denouement was absolutely comic), now we're going to waste all kinds of time worrying about the September 20-21 two (count 'em! TWO!) day meeting. To say nothing of the Fed minutes on Tuesday and the jobs report on Friday.
So, as I stated earlier, I really don't want to care which way the market is heading right now. I have a series of carefully-selected longs and shorts. Don't get me wrong; I vastly prefer being up to my neck in short positions and watching the market absolutely fall to pieces. But, let's face it, falling-to-pieces only lasts a little while, and there are ample forces that are constantly at work to keep propping up the house of cards. Having endured the rally-from-hell from September 2010 to July 2011, I have no interest in continuously entering shorts and hoping that the rally will end. No, thank you.
In going through charts this evening, the vast, vast majority of opportunities remaining appear to be on the short side (whereas this weekend it was about a 50/50 split). So while I am relatively neutral right now, I imagine I'll be tipping a bit more bearish soon, unless we see yet another rally on Tuesday.
In closing I will say if you doubt the end-of-days is upon us, just take a moment to read this little article about a new Twitter record. If that doesn't convince you that doom is on the horizon, nothing will.