That's pretty much my philosophy right now regarding the general markets. It's far too neurotic and headline driven to contemplate trading it for my liking. A landmine field is a good way to describe it. I've been quite skeptical about the sustainability of this latest rally but I'm respectful of it and namely, the potential for another stab higher to 1115-1130 to really squash whatever remains of the trapped bears from last week and at the same time suck in more bulls before the trap door is sprung again.
The negative bearish sentiment I pointed out last week has unwound somewhat but admitedly it can still unwind more before hitting extreme levels which is why I'm respectful of another stab higher. However, given what I said in my previous post along with the gap up nature of this advance I doubt this rally is the start of something sustainable even if we go higher. Ultimately I expect full retracement. In the meantime the market will probably frustrate most bears into submission before dropping in a meaningful way and that suggests more choppiness.
By the way, Lester is now 25% short via puts as of yesterday.
A full retracement back to S&P 1040? Wouldn't that kind of price action would suggest the market could sink a lot further? Maybe even below 1000 to 950.
ReplyDeletenot neccessarily. We've been in a trading range from about 1130 to 1040 for a few months with the July bottom headfaking below it so I don't see why we can't simply retest the bottom of that range (or go back to the July lows) before heading up again. I'm not saying that's what I expect for sure but rather that it wouldn't be unusual or improbable.
ReplyDeleteIf the wheels fall off of this "recovery" and we double dip then sure, we can go to 950 and lower. It's tough to tell what path will be taken which argues for doing less and waiting for signs of the market telling us. To me, the gap and run nature of this advance is telling me to be skeptical that this is the begining of a sustainable rally that blasts us out of this range to new highs. I lived through 2 big bear markets watching the tape day by day and these are the types of rallies you see in bear markets. These rallies can look good and can even last for up to a month or 2 breaking trendlines, moving averages....doing whatever it takes to convince enough people that it's the real deal and then that's when the trap door is sprung. For example, I remember a lot of people getting excited and bears throwing in the towel when the downward "trendline" was broken to the upside in late July.