Most trading bromides are useless and annoying (the all-time champ: “Trade the chart in front of you”) but one I think is actually worth remembering is “Trees do not grow to the sky.” That is a reference to stocks going up, but there should be some converse for stocks going down, like “Roots do not go to the Earth’s molten core.” Nah, that’s not quite it.
Anyway, this has been a fun week, no doubt about that for one moment:
People have been running around screeching as if we’re crashing, when in fact volatility has barely budged. It wasn’t that many days ago that the VIX had a 12-handle, and even the /VX futures are still within the teens. Let’s just say it’s not time to talk “crash” until we’re in the 40s or above.
All the same, loaded-to-the-gills as I am with put options, I’m getting a little jumpy. I was so horribly scarred by June 16 and October 13 of last year (yeah, I do NOT need to look up those dates) that the notion of just hanging on to puts permanently isn’t really my cup of tea anymore. I have made no secret of my target prices, and we’re getting uncomfortably close. That’s fantastic, of course, but it also sucks, because it means the joy of watching bulls bleed out every day is probably going to be over soon.
The bond market, in my estimation, is a longer-term harbinger of worse things to come for equities. Simply stated, I think we’re going to reach a short-term bottom very soon (again, that sucks, I am having WAY too much fun), but after a hearty rally, I think we’re going to give breaking 4300 another try. September may, in fact, be the true bottom for this move before idiot Yellen dreams up another criminal scheme.
It’s tough to know where to take profits, however. My GM puts, for instance, have a nearly 70% profit, so it would be nice to take the money out, but if you look at the chart, it seems to be forming a truly epic top which hasn’t even begun to realize its potential yet. Remember, in the first half of 2022, I was screeching about taking profits and seeing positions DOUBLE in profits after that with me not participating.
Anyway, this is going to be an interesting day, and if we go plunging like yesterday, I’ll probably take a fair number of positions off the table, or at least substantially lighten them. Trading does NOT normally feel this good for this long, so I think I am being appropriately terrified.
