Good morning, everyone, and Happy Friday. I survived night number two with little Duke, and he’s doing great. He has intuitively grasped that when I stand and work, he can just curl up right next to my feet and relax. Clearly this pup understands the nature of Slope. By the way, if anyone recommends to you the value of setting an alarm clock to go off once every hour all night, tell him no thank you.
The past five trading days have been amazing, and now that the PCE is out (which came in precisely at the estimate), I think Friday has a good chance of working out well too. The /ES, shown below, had two big downturns (purple) thanks entirely to Bear Force One. The juiciest downturn was the post-NVDA “hey, maybe this tree isn’t going to grow to the sky” realization, shown with the red arrow.
It struck me as odd yesterday that one of the few green quotes on my screen in the morning was China, of all places (by way of FXI). I hadn’t touched this item in eons, but I decided to really get in big, so I shorted it in size and also bought a lot of relatively short-dated puts (April expiration, in contrast to all my other positions, which at the very earliest are July).
Judging from overnight action, it seems this was the right call! Indeed, although I’ve been doing very well shorting GLD lately, this move to FXI is a change for me, but I don’t intend to make it short-term like I did with gold. This one could have some legs.
The looming question is whether this market weakness will continue or, like so many times before, do we only get a few days of fun only to see the bull market resume. Honestly, even if we do rally, I think this bull market is cooked.
Shorter-term, I take note that the failure of the VERY long-term (decades!) channel midline for SPY has not, in recent months, been a great time to stay short. The last time it produced a continuation of weakness was last summer. Suffice it to say I might be trimming some positions today, out of an abundance of caution.
I don’t normally have the time or energy to look at comments, but I saw Gonnabesick left a variety of interesting quotes and tips for traders. One in particular caught my eye, and I’ve boldfaced the part that I think represents the present state of the world.
Very early in my career, a veteran investor told me about the three stages of a bull market. Now I’ll share them with you. The first, when a few forward-looking people begin to believe things will get better. The second, when most investors realize improvement is actually taking place. The third, when everyone concludes things will get better forever. Why would anyone waste time trying for a better description? This one says it all. It’s essential that we grasp its significance.
