Mario "Ivan" Draghi says "I must break you" to the bears

Whatever he hits...he destroys!  Ivan Draghi laid the smack down on the bears Thursday and Friday with his "whatever it takes to save the Euro" comment. After Thursday's morning pop, I'm sure a lot traders shorted it thinking "what a bullshit rally this is" and now after today they are being carried out on a stretcher. Like the last 2 summers, the market is extremely headline driven and headlines of importance are those that come out of Europe and since Europe opens before our markets, there is a tendency for large gaps. So, if you want to trade the ST wiggles successfully, you have to be willing to hold overnight positions gambling  hoping that the morning headlines will be favorable to you. The "buy the dips" and "sell the rips" strategy would have been a winner for the past couple of months assuming you would scale into positions not blowing your load on the first dip or rip.

I want to take more of a trader approach to the market at this point. For me that generally means trading the 1-4 week moves in the market but I've been finding that the market has been moving too quickly for me at the turning points. I would have to be forced to pick tops and bottoms, although I suppose that can be mitigated by scaling. I'm also having a problem with conflicting indicators which give me the case of "analysis paralysis". I need to simplify things and just pull the damn trigger. For instance, twice now I failed to pull the trigger on SDS weekly puts.  Last Thursday and again this Wednesday I had them on my radar. I wanted to see how the market would open the following day before pulling the trigger but the market had gaped up big and so the opportunity was lost. Had I attempted to bottom pick - which I would have nailed perfectly - I would have had 200-400% winners in just 1-2 days. Mind you, I would have bet quite small on such risky trades but I would have won instead of just sitting on my hands doing nothing. Doing nothing is what I've been doing for a quite some time and I'm tired of it. I realize though that trading for the sake of trading will usually backfire and I won't do that but for fuck sakes I need to just pull the fucking trigger sometimes and break out of my shell.  There will come a time when my classic "buy and hold" strategy will work again but I don't think that time is now. I'm sure there are some stocks out there that will turn out to be good buy and holds (and I believe my position in hwo.to is one of them) but until bull market conditions return, buying and holding is not the optimal strategy.  Having said that though, I'm not going to resort to daytrading either. To me that's as close to pure gambling as it gets. I'm sure there's some profitable daytraders out there but to me , I see it as far too random.

I could of course, continue to do nothing this summer and wait for the smoke to clear just like I did in the summers of 2010 and 2011 but I want to do better this time. Also, unlike those last 2 years, I don't have a sizeable gain for the year banked which made it easier to just sit and wait. Again, I realize the danger in trying to make something out of nothing so I need to make sure I only play the premium hands...but I need to play the fucking hand when it's dealt and not hesitate so much because in this market if you blink, your opportunity is gone. 

On the sentiment front, once again AAII showed a dominance of bears over bulls while NAAIM and the Rydex ratio are conflicting showing complacency. I mentioned last week, that despite the complacent conditions of other indicators, this extreme bearish AAII reading prevented me from making an IT downside bet. I was wondering how this confliction would be resolved and low and behold the AAII reading ended up signalling correctly that there was indeed too many bears. Perhaps though, this will only result in ST strength (which we now got) which will clear the way for a larger move down later. Another thing that prevented me from making an IT downside bet was the persistent strength in gov't bonds.  ST/IT tops tend to be proceeded by some sort of sell-off in bonds...it doesn't have to be huge....but at least something. Well, we finally got that today although it's a rather small sell-off given the move up they had.

On the fundamentals front, there's some troubling signs in earnings. This earnings season has not been that great. Remember, in the end its all about earnings...that's all that counts. This  article does a good job in highlighting the concerns. We've haven't seen the threat of earnings deceleration like this since the start of the bull market. One positive way to spin this is that expectations for Q3 earnings have been significantly reduced which makes it easier for upside surprises but I would counter that by saying you could see a situation where expectations are correctly lowered but not not lowered enough. Once there's a turning point in the economy, analysts tend to over or under estimate the new trend. I remember in late 2008 bears saying how foolish analysts were in their expectations for a significant rebound in 2009 earnings...well...it turns out they were right to expect a rebound but they weren't optimistic enough! So, it could turn out the be case that analysts are not downgrading earnings nearly enough  if the economy has indeed tipped towards a recession. Of course, if they are wrong and Q2 just turns out to be a slow patch then you will see a rip roaring rally in the last few months of the year...again.