My view hasn’t changed since the middle of October. …this market is set-up for a nice decline.
And so far, while my view hasn’t been realized, the market hasn’t rallied further. In fact, the tight trading range at all-time highs has proven to be an excellent area to sell credit spreads. Moreover, I think the major benchmarks could be trading at levels that offer a wonderful opportunity to take a few short-term aggressive plays like buy a few puts. I typically, don’t buy options, but at these levels it’s hard to pass up…and we’ve actually had very good fortune buying puts over the past month. So, if you are a subscriber, stay tuned because there is a very good chance that I will be adding to our December positions tomorrow.
I just can’t ignore all of the historical precedents that are being set. We have a high number of buying climaxes, an enormous, almost historical spread between Smart and Dumb money, 12-year lows in Rydex money market assets, record high newsletter optimism among a slew of others. It’s not that we are seeing the typical bearish indicator pop-up after a typical, extended, bull rally. We are witnessing some of the most bearish sentiment seen in years…and the pot odds for a decent move lower are increasing as each day passes.
As I said earlier, we’ve had the good fortune pulling consistent profits out of the market since June expiration. But now, I think we have the opportunity to truly expand on our profits. I know we are in a typically bullish seasonal period, but the alarming amount of bearish indicators hitting the market just can’t be ignored. So again, I will be taking a few more aggressive shots as a result.
If you are a believer in a statistical approach towards investing please do not hesitate to try my options strategies. I use simple mean-reversion coupled with probabilities for each and every trade. Give it a try, it’s free for 30 days.