Markets broke out as I expected....but much quicker than I thought and not with good market action i.e. it broke out with a gap up and run. Markets are now very ST overbought and will likely cool off in the next 1-3 days. It wouldn't suprise me to see the bulk of this move get retraced in short order.
So have the bears finally given up? Nope. One by one their ranks are dropping but this is only happening by brute force i.e. accounts blowing up. I still see plenty of the wrong way bears still stubbornly clinging onto their bearish views mostly supported by rear view mirror data.
The next shoe to drop according to bears is commercial real-estate. I even heard one of the BNN anchors mention this worry the other day. Maybe it happens but if you've been in SRS betting on this you have been absolutely crushed like a bug. That's why when it comes to the market timing is EVERYTHING. Being right but early is often just as the same as being wrong depending on how you bet. I have been calling FAZ/SKF/SRS the troika of death not only because these are the bear ETF which obviously do terribly during rising markets but also because they have a "decay" factor when the underlying index is volatile. For example if you buy one of these "investments" and 6 months from now the underlying index it tracks is unchanged but had quite a bit of volatile swings in the interim, it's quite possible for you to be down 30-50% on your eft due to this "decay" factor.
The greater the leverage the more the decay. On the flip side, when the underlying index is in a solid uptrend you get the added benefits of compounding which amplify returns.....it's all in the math of how the returns are calculated....anyhow I digress.
The so called next shoe to drop in the form of commercial real-estate appears to be a widely advertised worry and so if you are bearish you should be concerned that perhaps the market knows this already and doesn't care. Perhaps the economy will revive in time making these worries overblown. Who knows for sure....its quite possible as I've seen before that the market is late in recognizing what appears to be something obvious (because of herd behavior dominating the market) but it could also be the case, as I've also seen before, that by ignoring a well know worry the market was correctly sending the message "you're wrong assholes" like with Y2k fears. This is why it's better to wait for signs the market is agreeing with you rather than being early trying to catch the turnaround because you could very well end up being flat out wrong and lose everything. In my opinion, it's better to miss the first 10-25% of a move and jump in with the wind at your back. But I am a hipocrite because I myself attempt to catch tops/bottoms but I will only do so with a)limited capital b)when I believe the set up is near perfect (extremes in indicators and some confirmation of a reversal or panick). This allows me to get out with limited damage if I'm wrong.
I'm sure quite a few people can provide me with convincing statistics, charts and arguments as to why commercial real estate is the next shoe to drop but until the market gives the thumbs up and shows signs of it paying attention to this potential problem I won't bet on it aside from a short term trade. Those who have bet on it have been taking horrific losses. Maybe they will be vindicated....maybe not. I'd rather wait for some sign of confirmation first. So you miss the bottom, big deal. Those who have been anxious not to miss the bottom are regretting big time now.
I am once again looking to buy puts on NEM. Gold and gold stocks did a nice downside reversal today in the face of a very strong market. The sector is quite overbought and talks of the dollar and commodities are at fever pitch levels. At the very least a nice pullback appears immanent. Hopefully I will be able to get a decent entry point.
I am also considering a long position on the yen via calls on FXY. More on this later....
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